How is VAT accounted when our US customer/buyer requests delivery of the goods to a EU consignee, yet Invoice to US buyer?

Question

How is VAT accounted when our US customer/buyer requests delivery of the goods to a EU consignee, yet Invoice to US buyer?

This question was asked during our VAT Fundamentals webinar. You can watch the webinar at http://opentoexport.com/info/webinars/#VAT_fundamentals

Answer

Hi Dawn, my take (my opinion) is as follows…

you wouldn’t be billing VAT to your clients in the EU so would still be the same if billing USA. (despite goods going to EU country, it’s classed as an export)
so not accounted as a sale to EU country.

https://www.gov.uk/guidance/vat-exports-dispatches-and-supplying-goods-abroad

“AT 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 and keep evidence of the export, and comply with all other laws. You must also make sure the goods are exported, and you must get the evidence, within three months from the time of sale. This can be longer for goods that need processing before export and for thoroughbred racehorses.

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 mustn’t 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, an indirect export, you may be able to zero-rate the sale as long as certain zero-rating conditions are met.”

Answer

If you refer to zero rating for exports, when you make a supply of goods to an overseas person for export, but deliver them to a third person in the EU, who is also making a taxable supply of goods or services to that overseas person, you can zero-rate the supply if;

•              The goods are only being delivered and not supplied to the third person;

•              No use is made of the goods other than for processing or incorporation into other goods for export;

•              The goods are exported from the EU (and you obtain evidence of export within the specified time limits).

Paragraph 3.6 of VAT Notice 703 – Export of goods from the UK sets out the conditions.

https://www.gov.uk/government/publications/vat-notice-703-export-of-goods-from-the-uk

Your records must be able to show that the goods you supplied have been processed or incorporated into the goods exported. If you do not meet all the conditions the supply cannot be zero-rated as an export and you must account for VAT at the appropriate UK rate.

If your supply involves goods located outside the UK when supplied then your supply is outside the scope of UK VAT and you don’t charge it. Paragraph 4.8.2 of VAT Notice 700 – The VAT Guide refers.

https://www.gov.uk/government/publications/vat-notice-700-the-vat-guide

HM Revenue & Customs

Customs International Trade & Excise

www.hmrc.gov.uk/contactus

Answer

Hi Dawn, my take (my opinion) is as follows…

you wouldn’t be billing VAT to your clients in the EU so would still be the same if billing USA. (despite goods going to EU country, it’s classed as an export)
so not accounted as a sale to EU country.

https://www.gov.uk/guidance/vat-exports-dispatches-and-supplying-goods-abroad

“AT 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 and keep evidence of the export, and comply with all other laws. You must also make sure the goods are exported, and you must get the evidence, within three months from the time of sale. This can be longer for goods that need processing before export and for thoroughbred racehorses.

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 mustn’t 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, an indirect export, you may be able to zero-rate the sale as long as certain zero-rating conditions are met.”

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