Sale of goods cross-border

Sales outside the EU

If goods are sold to customers from outside the EU the sale is regarded as made in the UK but can be zero rated as an export. Exports are divided into “direct exports” (where the seller arranges transport of the goods to the customer) and “indirect exports” (where the customer arranges the transport of the goods).

There is also a “VAT Retail Export Scheme” under which retailers can zero rate sales to overseas visitors. In each case, retailers must comply with detailed rules.

Sales within the EU

Goods sold to business customers who belong to another Member State are supplied in the UK but are not subject to UK VAT. The customer is required to account for “acquisition tax” in the Member State of acquisition. This means that customers charge themselves VAT on the goods sold to them (known as “acquisition VAT”) and can recover this as input tax subject to the local rules.

Conversely, a business customer (including a VAT-registered charity) who receives goods VAT-free from a supplier in another Member State is required to account for “acquisition tax” in the UK.

Distance selling

If goods are sold by a UK entity to a customer who belongs in another Member State but who is not VAT-registered there (for example, private individuals, public bodies or charities) the place of supply is the UK and UK VAT is due until the “distance selling threshold” is exceeded in a particular Member State. Once the threshold is exceeded, the supplier will be required to register for VAT in that Member State.

Hence, for example, a charity selling goods by mail order would be required to register for VAT in Spain if the value of sales to non VAT registered Spanish customers exceeded €35,000.

For further information see HMRC guidance on VAT: exports, dispatches and supplying goods abroad

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