The rules and principles for selling overseas are quite involved as they depending on where the sales are being made, whether they are goods or services and whether you are selling to a business or consumer. Services are the most topical at the moment with the introduction of the Mini One Stop Shop (MOSS) for reporting VAT on sales of digital services to other EU consumers. This was specifically aimed at the likes of Amazon and Google but has impacted on many other businesses too.
Sale of services
- The simplest scenario is a business to business (B2B) sale of services to a customer in another EU state. If they provide their VAT number these are accounted for as zero rate sales
- If the customer is not VAT registered, including business to consumers (B2C) sales again within the EU, VAT should be charged at 20%
- The newest category is sale of eServices to consumers in the EU where reporting must be made using MOSS. There are two categories which are dealt with in a different way
- For fully automated sales, where there is no human intervention, the VAT is charged in the country where the customer belongs and you need two forms of identification to prove this. An example of this would be purchase of a download online where part of the process directs you to where the software can be downloaded – there is no human input. These would have to be reported using MOSS
- Where there is human intervention, whether in “producing” the software or download or in supplying it such as manually sending a link by email for the download location, this would be VATable in the country of supply (ie UK) and VAT would be reported on the usual VAT return
- For sales to the rest of the world (ROW) supply of a service is based on where your customer belongs, and you do not have to charge VAT or include the sale on your VAT return if you are registered
Sale of goods
- In a similar way to the first point in the services section, for sale to a B2B customer in the EU, provided their VAT number is quoted VAT is accounted for as zero rated. You must keep evidence that the goods left the UK.
- No VAT is charged on sales of goods to the rest of the world however there must be evidence that the goods left the EU
- There are other considerations outside the scope of this article regarding reporting and duty payable on sale of goods which you may need to be aware of
Our thanks go to Robert Killington of VATARK for his assistance in preparation of this article
This is a brief summary of the main fact but you should seek professional advice before taking any steps based on the contents, depending on you specific situation. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Gravesend, Kent – Accountants who “speak your language”