VAT - Outside the Scope?

[Charliebrown]

If a UK VAT registered company buys and sells goods in Germany without the goods ever passing through the UK, are these supplies outside the scope of UK VAT?


...and most probably inside the scope of German VAT - depending on their legislation?
HM

[Kevin Hall]

Probably, yes.

As usual with VAT, it does depend on a wealth of details though. For example, some VAT schemes operate EU-wide (such as Margin Scheme, perhaps even Distance Selling).

[Charliebrown]

Kevin,

Thanks for your response. The UK company in question is in face buying and selling through a website in Germany. I have considered the distance selling rules however am erring on the side that distance selling doesn´t apply because there is no movement of goods from the UK - ie UK company buys goods in Germany through a website and then resells in Germany through a website. Is this analysis correct or can distance selling apply without any involvement of the UK other than it being a UK Limited Company that is doing the selling?

[Kevin Hall]

The website is irrelevant. You need to identify where the goods are located. I will assume they are and remain in Germany. If so, the place of supply appears to be Germany ("Distance Selling" rules do not seem to apply, though frankly there is little commentary and little legislation aimed directly at this scenario). EC VAT law states:

Article 32
Where goods are dispatched or transported by the supplier, or by
the customer, or by a third person, the place of supply shall be
deemed to be the place where the goods are located at the time
when dispatch or transport of the goods to the customer begins.

Article 33
1. By way of derogation from Article 32, the place of supply of
goods dispatched or transported by or on behalf of the supplier
from a Member State other than that in which dispatch or
transport of the goods ends shall be deemed to be the place
where the goods are located at the time when dispatch or
transport of the goods to the customer ends, where the following
conditions are met:

(a) the supply of goods is carried out for a taxable person, or a
non-taxable legal person, whose intra-Community acquisitions
of goods are not subject to VAT pursuant to Article 3(1) or for
any other non-taxable person;

(b) the goods supplied are neither new means of transport nor
goods supplied after assembly or installation, with or
without a trial run, by or on behalf of the supplier.

Article 33(1) refers only to "goods ... transported ... from a Member State other than that in which ... transport of the goods ends". So it seems to me that Article 33(1) limits the application of this mechanism (i.e. essentially "Distance Selling") to transactions where the goods move from one EC Member State to another; which is not the case if the goods remain within Germany.

Using Article 32, it seems to me that the goods are simply supplied in Germany (i.e. where the goods are locarted when they are transported to the customer in Germany) and will be subject to German VAT rules. If you are not required to register in Germany (e.g. if the value of the sales in Germay are so small), you might not have to charge VAT on the sale of the goods at all.

But do check out the movement of the goods. A German website does not necessarily mean that the goods are stored and transported from Germany.

Hope it helps?

[Charliebrown]

Thanks Kevin!