There have recently been some changes to VAT for trading with precious metals, coins, art and antiques.

VAT margin scheme on trade with coins, works of art and antiques

What legal changes have been made?

A significant change is in effect since 1 January 2025 with regard to the VAT margin scheme pursuant to Section 25a para 7 No. 1 lit. c of the (German) VAT Act (UStG). The margin scheme is no longer applicable in cases covered by Section 25a para 2 of the (German) VAT Act if a reduced VAT rate was applied to the supply preceding the reseller's supply of goods. Section 25a para 2 of the (German) VAT Act covers works of art, collectors' items and antiques imported by the reseller himself, as well as works of art if the supply to the reseller was subject to VAT and the supply was not made by a reseller. In practice, this mainly concerns cases in which the reseller has imported the goods from a third country himself and applies the reduced VAT rate to the importation. This means that, in addition to the requirement of a two-stage valuation procedure for coins imported by the seller himself (stage 1: existence of a collector's item, stage 2: exceeding the 250% limit), the  VAT margin scheme on direct purchases from third countries is now also excluded. Coin traders are therefore now “punished” twice in third-country cases.

However, according to the wording of the amendment, this does not apply to cases covered by Section 25a para 1 of the (German) VAT Act, i.e. it does not apply to items such as coins or works of art purchased by private individuals in Germany or by traders from other EU Member States. In domestic and EU cases, therefore, everything remains as before, and the VAT margin scheme can continue to be applied.

Why have these legal changes been made?

The reason for the change is that, since 2023, a two-stage valuation (existence of a collector's item and exceeding the 250% limit) must be carried out for self-imported silver coins in order to apply the reduced VAT rate or margin scheme in accordance with Section 25a para 2 No. 1 of the (German) VAT Act (UStG). This allowed resellers based in Germany to purchase (silver) coins from Poland or Bulgaria subject to the margin scheme and have the coins delivered to Germany. Previously, the Polish or Bulgarian reseller imported the coins from a third country to Poland or Bulgaria applying the reduced VAT rate. The German reseller then sold the third-country coins purchased in this way within Germany applying the margin scheme. This meant that the reduced VAT rate could be applied to the importation of goods and that a sale subject to the margin scheme could be made within Germany without applying the two-stage test under section 25a para 2 of the (German) VAT Act (collectors' items and exceeding the 250% limit). The insertion of Section 25a para 7 No. 1 letter c of the (German) VAT Act puts a stop to this practice. This is because the provision now prohibits the application of the VAT margin scheme if a reduced VAT rate was applied to the supply preceding the reseller's supply of goods.

What should coin traders and art traders do now?

The changes in the law have a big impact on the supply chains of coin traders, art traders, antique traders, and galleries. Traders should take another look at their supply chains from a VAT perspective and check (or have an expert check) if the margin scheme applies. It will often make sense to restructure supply chains to optimise the business with art, antiques, and coins. A distinction must be made between goods imported from third countries and goods purchased within the EU or domestically. The exclusion of the VAT margin scheme for coins and works of art imported at the reduced VAT rate will involve additional work and a change in business models for coin and art traders.

Reduced VAT rate for works of art and collector coins

Following the amendment of Section 12 para 2 No. 1 of the (German) VAT Act, the supply of goods, intra-Community acquisition and importation of works of art and collectors' items are subject to the reduced VAT rate of 7%. The legislator had already introduced the reduced VAT rate for works of art and collectors' items before 2013, but abolished it again on 1 January 2014. The legislator is now responding to the restriction on the margin scheme under Section 25a of the (German) VAT Act and reintroducing the reduced VAT rate on supplies of works of art and collectors' items. In contrast to the previous regulation, which was in force until 31 December 2013, the reduced VAT rate does not apply to the letting of works of art and collectors' items.

The reduction in the rate of VAT on the supply of goods now excluded from the margin scheme is therefore complementary to the change in the margin scheme.