What are the VAT Implications of Exporting?

Businesses looking to expand into the export market must be aware of important VAT regulations on whether or not sales are zero rated, as well as what documentation is needed.
Selling to other EU states

When selling to EU member states it’s vital to obtain your customer’s VAT number. A sale to a customer in another EU member state can only be zero rated if you have their VAT number and quote it on your invoice. Without the number, VAT must be charged at the appropriate UK rate – in other words, standard rated, reduced rated or zero rated, depending on the nature of the supply.

Business entering the export trade should also be aware of which countries are in the EU. For example, Norway and Switzerland are not – although it might easy to imagine that they are. A current list of members can be found at http://europa.eu/about-eu/countries/.

The importance of obtaining and retaining correct documentation cannot be overstated. The type of documentation depends on whether you handle the export yourself, or use an agent. In either case, you must be able to demonstrate that the goods have left the UK for another EU member state.

Exporting to non-EU countries

When selling goods or services to non-EU countries, all exports are zero rated. Unlike sales to EU member states, the taxable status of your customers outside the EU is of no concern to the UK VAT authorities.

Nonetheless, it’s essential to ascertain if the customer is collecting the goods from the UK? If so, this is known as an indirect export, because you are not in control of the goods leaving the EU. This means you will need to obtain evidence of export from the EU from your customer within three months.

If you don’t know the customer, or believe they will not provide satisfactory evidence in the time frame, you should consider taking an additional sum equivalent to the VAT that would have been chargeable. You can then refund this sum when the evidence is provided.

For further information on the VAT implications of exporting contact the VAT specialist team on 01772 821021.