Export VAT – What is export VAT?
Export VAT is a tax on goods and services provided to customers outside of the UK.
There are two sides to international trade: importing and exporting. Find out whether you should pay Import VAT on goods or services purchased from abroad.
If you have customers abroad, you may need to charge VAT on the goods and services you provide. Whether or not you should charge VAT depends on:
Where in the UK your business is based
Where your customer is based
Whether your customer is VAT-registered
Whether you sell goods or services
How much you sell
As a general rule, export VAT only applies within the European Union. This means that you can zero-rate any goods/services sold to customers outside of the EU, providing that you keep records of the sale and comply with all other regulations.
It’s important to note that Northern Ireland is still part of the EU VAT area post-Brexit, meaning that businesses in Northern Ireland treat export VAT differently than businesses in Great Britain (England, Scotland and Wales).
Post-Brexit, you can zero-rate most exports from:
Great Britain(England, Scotland, Wales) to any destination outside of the UK
Northern Ireland to any destination outside of the EU and the UK
Therefore, you may still be required to account for export VAT if you’re a Northern Ireland business sending a shipment to an EU country.
If you send goods abroad, you need to ensure they’re actually exported - this must be done within 3 months of sending the shipment or receiving payment, whichever is sooner. If you don’t get evidence that the sale can be zero-rated, you’ll need to account for the VAT.
You can find more information about exports and the rules surrounding them on the UK Government website.
The rules for charging VAT on sales made within the EU (including Northern Ireland) is more complicated. Whether or not you should charge VAT depends on whether the customer is VAT-registered and whether you sell goods or services.
If you sell services to businesses based in the EU, you would not normally charge VAT. Instead, your customer will pay VAT in their own country by following the reverse charge procedure.
When selling services to consumers in other EU countries, the customer should be charged the same VAT rate that applies in the UK (i.e. 20%).
The exceptions to these rules are telecommunications, broadcasting and electronic services, which are taxed in the customer’s country.
Whether you need to charge VAT on goods sold to a customer within the EU depends on whether your customer is VAT-registered. If you charge VAT on goods sent to EU customers, this needs to be reported in your VAT Return.
If you sell goods to a customer that’s registered for VAT in their own country (i.e. a VAT-registered business), you don’t need to charge VAT on goods sent within the EU. However, you do need to ensure that:
You get the customer's VAT number, and include this on your sales invoice
The goods are sent within three months
You can prove that the goods have left the UK
If you send goods to a customer that’s not registered for VAT, you should charge VAT at the UK rate.
If you regularly export goods to consumers (i.e. not businesses) in another EU country, you may need to register in that country and charge the local VAT rate.
Whether or not you need to register in individual countries depends on whether your sales reach a certain threshold set by that specific country. If you reach the VAT threshold in more than one country, you would need to register in each place.
For example, a Northern Ireland business produces bikes which they sell to consumers in both Denmark and Spain.
In Denmark, the threshold is 280,000 kr. The Northern Ireland business sells 300,000 kr worth of bikes each year so must register in Denmark and charge their Danish customers the local VAT rate of 25%.
In Spain, the threshold is €35,000. The UK business only sells €33,000 worth of bikes so doesn’t have to register for VAT in Spain and does not charge their Spanish customers any VAT.