Is a U.S. based seller supposed to collect VAT?

Naltima
New Member
1 0 0

We recently started getting orders from Europe and we are not exactly sure if we are supposed to collect VAT from those customers. Does anyone have any experience with this and if so is there any good documentation? Thanks in advance.

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Dan_Bernard
Explorer
55 0 47

Hi, being UK-based I can answer that question.  The rules requiring VAT to be collected apply only to retailers selling out of an EU (European Union) country.  For US and other non-EU sales, Customs will charge and collect VAT from the buyer when the parcel arrives in the destination country

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Alex_Schondorf
New Member
1 0 0

What if you use a fulfillment center in the UK for your shipments to european customers, but you collect the money in the US? 

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Dan_Bernard
Explorer
55 0 47

I am pretty sure the answer is the same.  What matters, as I understand it, is where the company making the sale is based and where the money is taken: how you get the product to the customer is up to you.  

However, if you are fulfilling via the UK, then the product will be subject to 20% VAT when imported into the UK fulfilment centre, which will be an added to cost to you. The customer would not be charged VAT by customs as the product would be shipped to them from within the EU.

The only way to recover this VAT would be to create a UK-based business that is registered for VAT, treat sales to the UK as having been made by that company, and then charge VAT as part of selling the product to UK (or other EU) customers. The VAT paid for the imports then becomes deductible from the VAT collected.

You're getting into quite complex territory here - I'd suggest you get advice from a UK-based accountant.

   

   

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