Registering for VAT and selling overseas

The Internet means you can advertise your products to a customer in, say, Italy, as easily as you can to one just around the corner. But if you make a sale will you need an overseas VAT registration. What’s the best way to get one? And what else do you need to know about VAT and selling overseas?

Exporting

Most countries have a sales tax of some sort and when you sell products to customers who live or have their businesses overseas you need to consider not only UK VAT, but also that for the country you export to.

The general rule for exports outside the EU

Where you sell goods to businesses or private customers outside the EU, you can zero rate these for UK VAT purposes as long as you follow the rules and keep the right documents – essentially, proof of export. Whether or not you to register for the equivalent of VAT in the country you are exporting to depends entirely on its rules.

Tip. There’s a wide choice of UK-based VAT specialists who can help with the registration and compliance requirements in other countries.

The basic rule for EU sales of goods

The basic rule is that you must charge UK VAT on goods you sell to non-business customers in other EU states in the same way you would if you were selling in the UK. This is known as “distance selling”, although the rules for this don’t apply to sales you make to EU VAT-registered customers. Sales of this type are treated similarly to sales to non-EU customers, i.e. as long as you have proof of export you don’t have to account for VAT on them.

When is a registration needed?

The EU has tried to simplify the rules on VAT registration by setting two possible sales thresholds which apply to distance selling. These are currently equivalent to €35,000 or €100,000. Each country can choose which of these they want to use. Only where distance sales exceed the registration limit for the EU country you are selling to do you to register there.

Tip. There are a number of websites on which you can check the EU registration limits for each country.

Trap. If your client makes distance sales of certain goods, essentially alcohol, tobacco and perfumes, you must register in the country where their customer is, regardless of how much you sell, i.e. there is no minimum sales limit.

What’s the sales turnover?

For registration purposes sales turnover in other EU countries is based on the calendar year and not a continuous twelve-month period as it is in the UK. So it’s important to keep track of your distance sales to each country separately. Computer accounting programs make this easy so produce an annual report of EU sales soon after the end of each calendar year.

Tip. The language barrier can make registration tricky, let alone having to cope with a whole set of different VAT rules and submitting return forms. As mentioned above, there are specialist firms that can help.

All sales to customers outside the UK can be zero-rated, but you may need to register in the country of export. Registration is not required in EU states unless your sales to non-business customers exceed €35,000 or €100,000 per year, per country.