Margin scheme
In one sentenceA method in which VAT on the sale of eligible used goods is calculated only on the difference between the selling price and the purchase price, not on the full price.
Simply put
A used-goods dealer usually buys from individuals who do not charge him VAT, so if he calculated it on the full price he would pay tax on value he did not add. That is why it is calculated on the margin only.
The margin is treated as VAT-inclusive, so you extract the tax from it by multiplying the margin by 15 and then dividing by 115. The VAT is not shown separately on the invoice.
Worked example
A used car showroom bought a car from an individual for 40,000 SAR, and sold it for 46,000 SAR.
Margin46,000 − 40,000 = 6,000 SAR
VAT from the margin6,000 × 15 ÷ 115
VAT due782.61 SAR
Formula: VAT = (selling price − purchase price) × 15 ÷ 115
Don't confuse it with
Taxable valueIn an ordinary sale VAT is calculated on the full value, and under the margin scheme on the profit only.