Sometimes when running a business you may not want to limit yourself to just having customers in the UK, or maybe another country can provide services that work better for you. It is normal for a business to do this, however as Value Added Tax (VAT) is different in other countries, this can affect how you account for it and complete VAT returns.
This blog will be covering the VAT implications of exporting goods to other countries.
Exports to the European Union (EU) customers who are VAT registered
If your customer is VAT registered you can make the sale of goods and services zero-rated (so no VAT is paid) if you can satisfy the following conditions:
- The goods are sent out of the UK to another EU country.
- Whoever you’re sending them to is VAT registered in another EU country.
- You get their VAT registration number, including the 2 letter country code, and show it on your sales invoice.
- You have evidence showing that the goods have gone out of the UK.
- You dispatch the goods and get evidence of removal within 3 months.
The values of the EU sale must be included on your VAT return in order to account for the zero-rated sale.
The evidence is available to prove that you have shipped the goods can vary depending on the method you use to transport them. For example, couriers normally give you an airways bill number or a Customs Dispatch Pack receipt copy, both of which are acceptable evidence. You can find more examples of acceptable evidence by this link.
Exports to EU customers who are not VAT registered
If you sell goods to a customer in the EU who is not VAT registered you will need to account for VAT in the same way as when you make a sale to a customer in the UK. As well as having to charge the customer an extra 20% on the selling price, if you exceed that country’s distance selling threshold you will have to register for VAT in that country. Details of distance selling thresholds for each country can be found at this link. The distance selling threshold is on the pair of columns to the right.
Export of excise goods to EU customers
If you sell excise goods, such as tobacco or alcohol to someone who is not VAT registered you will need to register for VAT in the country you are selling to; unless they collect the goods. If they are collected you will charge zero-rated VAT unless the goods are for private consumption, in which case they are treated as normal VAT sales.
Exporting to countries outside of the EU
VAT applies to goods sold in the EU, therefore any exports made to countries outside the EU can be treated as zero-rated as long as you can provide proof of the sale and comply with all laws involved. If the customer asks for goods to be delivered to a UK address, you should not zero-rate the sale.
Reporting export of goods
When you make sales to EU countries, you will need to put the VAT amount for sales in box one and the net sales amount in boxes six and eight. This means you treat the VAT the same as with UK sales. For EU sales you also need to fill in a VAT EC Sales List form to notify HM Revenue and Customs of how much sales income you have made from each country.
You can find more information regarding exports and the rules for more complex situations by clicking this link. If you would like any advice or assistance with the above or with VAT in general, please do not hesitate to contact us.
