VAT on Goods Sold Internationally
VAT on distance selling goods
Following the recent referendum, it is a good time to examine some of the VAT rules on sales from the UK to other countries as they apply at the current time. VAT rules are notoriously complex and care is always required to be certain of the VAT treatment. Today we are looking specifically at a UK VAT registered business selling goods to individual consumers (as opposed to business customers) abroad.
The way VAT is applied depends upon where your consumer is located: in the EU or outside the EU. If the consumer is outside the EU then you do not charge VAT and instead fill out a customs declaration form, ensuring you keep all proof of the export. It is easy to forget that countries such as Switzerland and Norway are not in the EU.
If the consumer is in the EU then it becomes slightly more complex. If the value of the goods you sell in any EU country is above the ‘distance selling threshold’ for that particular country you must register and charge VAT in that country. The distance selling thresholds are available on the Revenue’s website (https://www.gov.uk/online-and-distance-selling-for-businesses/selling-overseas).
Initially, UK VAT is applied to the transaction but you must keep track of the value of sales to each country in the calendar year. Once the value of the goods you are selling breaches the threshold of the country you are selling to (which is quoted in Euro’s and must therefore be translated) in the calendar year, you will need to register for VAT in that country and you should stop charging UK VAT at this point. Until you reach this threshold, UK VAT should be charged in the same way as you would for a UK customer. As you will see in the above link almost all thresholds are lower than the UK VAT registration limit (£83,000 since 1 April 2016).
Consider the following example selling goods of €20,000/€50,000 to consumers in Spain:
|Example 1||Example 2|
|Value of Goods €20,000||Value of Goods €50,000|
|Distance Selling Threshold (Spain) €35,000||Distance Selling Threshold (Spain) €35,000|
|Therefore, UK VAT is charged and no need to register in Spain.||Therefore, you must register your company for Spanish VAT and pay the rate for the full €50,000.|
It is important to remember that these rules only apply to sale of goods and only to individual consumers from a UK business.
If you would like more information or if you require advice on VAT please contact our Tax Director, Jenny Marks.
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