January 15, 2020
International VAT: Simplified
What Is VAT?
VAT, Also known as Value Added Tax in the UK or as Goods & Services tax in some countries, is a type of tax that is based on the value of a product or a service. VAT is applied in all countries inside of the EU but it is worth noting that some countries outside of the EU have their own rules regarding VAT.
If you’re planning on trading goods inside of the EU then its important that you provide HMRC with both a EC Sales List & a Intrastat. The UK Government provides strict guidelines on how to ensure you are registered for both of these and it is vital that you stick to these guidelines, for those outside of the UK then you may be able to find the information you require here
Dispatching Goods Inside of the EU
If you’re based inside of the UK and sell products to a customer based in another EU state then this is considered dispatching. When dispatching its worth noting that each EU state has its own VAT threshold for international sales and if you break this threshold then you may be required to register there & start charging local VAT rate. Here is a list of the VAT thresholds
If you are dispatching and the customer isn’t VAT registered (More common in B2C transactions) then as long as the transaction is within the VAT threshold then you will have to charge them UK VAT.
If the customer is VAT registered however (More common in B2B transactions) and they are able to provide you with their foreign VAT registration number then you are able to not charge VAT on the sale by applying a zero rate on the sale & they will be responsible for accounting for VAT on their end.
Purchasing Goods Inside of the EU
When you make business purchases from outside of the UK from EU states then similar rules as dispatching will apply. If you are not currently VAT registered then you will be charged by your supplier.
However, if you are VAT registered and are able to provide your supplier with your UK VAT Registration number then you will not be charged VAT by your supplier. You will however be accountable for paying the VAT yourself for through the acquisition tax mechanism.
Dispatching Goods Outside of the EU
If you’re selling products to a customer who is outside of the EU then VAT is not normally charged on these exchanges, providing you are able to show proof that the customer is outside of the EU.
Purchasing Goods Outside of the EU
If you’re making a purchase from a supplier based outside of the EU then no VAT will be charged by the supplier. However, this means that the purchase is subject to import VAT. You can find out more about import VAT here.