VAT has always been a complicated tax, and from 1 January 2021, for your business, you may think it has got even more complicated. So when should you add VAT to your product sales?
If you are selling goods internationally, if the goods are physically crossing an international border on a permanent basis, then the vat rate becomes zero rated, regardless of whether they are Business to Business (B2B) or Business to Consumer (B2C) – this is similar to the non-EC sales before Brexit. For VAT purposes, sales of goods to Northern Ireland are still part of the UK, so you would continue to charge VAT at the appropriate rate. A Consumer for this purpose is someone not in business, and the best way to check this is by getting your customer to provide their VAT/GST/Sales Tax number including the country code.
Although in effect the sales are deemed to have taken place where your customer belongs, it does depend on where the goods are located when they are sold, where they are shipped to and who organises the shipping. Generally, if the goods are to remain in the UK, you would charge VAT as normal, whereas if they are moved across an international border, you would charge 0% VAT. If your customers business has a UK branch, and you are invoicing the UK branch (and the goods remain in the UK), you would again charge VAT.
If you are selling goods to a consumer (B2C) to EU countries, particularly after 1 July 2021, you should also consider the implications, as you may have an obligation to register for VAT in some EC states, or treat the sales as exports in the UK, meaning your consumer in the EC may have import VAT to pay when the goods arrive.
Sales of services (i.e. non goods) may have a different VAT treatment, so if you sell services internationally, look at our next VAT Common Pitfalls article. The VAT rules in this article are aimed as a general guide, and so if you want to discuss your own circumstances in more detail and the implications of your trading, contact us.
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