VAT & Goods
Buying and Selling to and from abroad
Cross border transactions involving goods aren’t always as simple as they seem, here are two scenarios to watch out for.
Selling Goods to other EU countries – Distance Selling
Most businesses know that they sell goods to an individual or a non-VAT registered business in another EU country that the sale cannot be zero rated and as such UK VAT has to be charged at 20%. This type of sale is known as “Distance Selling”. However not as many business are aware that if their distance sales to individual countries within the EU exceed certain thresholds they are obliged to VAT register in that country. For most countries the threshold is 35,000 Euros.
Therefore exporters of goods to the EU subject to the Distance Sales rules need to consider how they monitor their sales on an individual country by country basis. For some business this may form part of their monthly management account information, however for most this data would not be readily available.
This could be achieved by for example attaching a department number, as such it would be possible to keep an eye on sales to each country.
Once a threshold for a country has been exceeded the business needs to VAT register in that country, this can be done via an agent or local representative.
Following VAT registration in another EU country there would be a “movement of own goods” from the UK to the other member state. As the business is VAT registered in the other member state this movement can be zero rated, correspondingly, the business accounts for acquisition tax, i.e. Box to on their VAT return, in the other EU country and then accounts for VAT on the sale to the end customer.
Moore and Smalley is a member of Baker Tilly International with offices across the EU. We can assist in finding a local representative to help with your regional VAT obligations including VAT registration.
Purchases of Goods from the EU
In order for a supplier of goods in another EU member state is able to zero rate their sale a UK business must provide them with their UK VAT number. The UK business then accounts for acquisition tax.
However there are circumstances when it’s not so easy, for example if a UK business has yet to VAT register, or if the goods are not coming direct to the UK, or not coming to the UK at all.
Prior to making any large purchases of goods from the EU it’s important that the UK business considers where the goods are destined to go and whether the supplier will be in a position to zero rate the sale. For example if the goods are going direct to an end customer it might be possible to take advantage of the “triangulation” simplification rules.
And a final thought…if a UK business is charged with VAT from another EU country…remember that it can’t be recover on the UK VAT return! It may however be possible to recover it through the EU refund mechanism.