ARTICLE · 21 MARCH 2024

When To Apply The Second Hand Margin Scheme (SHMS)

McMillan Woods

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An Italian watch supplier sells watches to a Cyprus Company, the Cyprus Company sells the watches to a Polish business customer.

European UnionTax

Example:

An Italian watch supplier sells watches to a Cyprus Company, the Cyprus Company sells the watches to a Polish business customer. The watches are transferred by the Italian supplier directly to Cypriot's Polish client.

The Italian supplier

Assuming that the Italian supplier sells under the Second hand Margin Scheme (SHMS) (see below for conditions for using the MS), they must account for Italian VAT on the difference between the purchase and selling price. He notifies the buyer by quoting on his invoice:

'No VAT has been or will be claimed regarding the goods sold under this invoice' and also Article 26a of Directive 77/388/EU "Profit Margin Scheme".

The Cypriot buyer

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