Taking the mystery out of VAT on Imports and Exports
You will know that complex regulations govern imports and exports. There are important VAT rules to consider if your business imports or exports goods or makes sales to other countries. Understanding the rules and making sure your systems and processes take these into account will help your business run smoothly and ensure you avoid fines and financial penalties.
S9 Tech works closely with businesses to support both Duty and VAT obligations on imports and exports around the world. We hope our expertise will simplify the essentials for your business.
In general terms, VAT is payable on all imports at the same rate that would apply to the product or service in the UK. You do not have to register for VAT to import goods, but obviously if you do not register you will not be able to claim back any VAT you pay.
Imports from the EU
If you buy goods in the European Union you must declare output tax on them on your VAT return. However, you are allowed to reclaim input tax on the goods subject to the normal rules. To reclaim VAT on imports you should fill in your VAT return for the period during which the goods were imported – you will get a C79 certificate to show what import VAT you have paid – and you will need to keep it as evidence to support your claim for inspection by a VAT visiting officer.
Imports outside the EU
If you import goods from outside the EU you will have to pay import VAT and Duty before the goods are released by HM Revenue & Customs. Remember that ‘Duty’ is a separate and additional tax which is based on the value of imported goods. Unfortunately Duty cannot be reclaimed by VAT registered businesses.
If you plan to re-export the goods after processing them you can apply for Inward Processing Relief. VAT and duty only become payable if you sell the goods in the UK or do not comply fully with the scheme’s conditions. If you import regularly you can also consider a deferment account, where you settle VAT and duty on a monthly basis. A deferment account is free and the advantage is you can put off payment for an average of 30 days and your goods will normally be cleared for release more quickly.
VAT on exports
The same rules will apply to the sale of most goods to customers registered for VAT in the EU. Under these circumstances you will also need to obtain and record their VAT registration number on your invoice. If you sell goods in sufficient quantities to non-registered customers in the EU you may be required to VAT register in other EU States.
If you do lots of trade with Europe you may have to submit more detailed information, known as the INTRASTAT Supplementary Declarations. The rules relating to the export of services are exceptionally complex and you should seek professional advice on this.
Paying VAT on exports to non-EU countries
VAT is a tax on goods used in the EU, so if goods are exported outside the EU, VAT isn’t charged. You can zero-rate the sale, provided you get evidence of the export, and retain commercial and official evidence of their removal from the U.K.
The evidence you obtain as proof of export, whether official or commercial or supporting must clearly identify: the supplier, the consignor (where different from the supplier) the customer, the goods, an accurate value, the export destination, and mode of transport and route of the export movement.
You must make sure the goods are exported, and you must get the evidence, within three months from the time of sale. The time of sale is the earlier of:
• the day you send the goods to your customer
• the day you receive full payment for them
You must not zero-rate sales if your customer asks for them to be delivered to a UK address. If the customer arranges to collect them from you, this is an indirect export, so you may be able to zero-rate the sale as long as certain zero-rating conditions are met.
If you provide services to customers outside the EU, you normally do not charge VAT. However, if the service is used in another EU country, that country can decide to levy the VAT. In this case you can still deduct the VAT that you yourself have paid on your related expenses (goods/services bought in specifically to make those sales).
If you import goods from outside the EU you can store them in approved HMRC warehouses if you wish, and only pay VAT and import duty when the goods leave the warehouse. This facility can be particularly useful if you do not intend to sell goods immediately.
If VAT has your systems in a spin then at S9 Tech we can relieve you of the burden with our automated VAT calculation on all of your imports and exports as well as automated collection of any duties owed with our bespoke software. For more information contact us.