Import from Asia, deliver EU, invoice Singapore, reclaim VAT

[Littleswede]

Hi, we are having a little problem... We are importing some goods from China, in our own name to UK, (we are a LLC registrered business in UK). Our client which are a large multinational company wants us to invoice their Singapore head office, but deliver the goods to Spain. Our problem is basically as far as i can see the VAT, we are a small company, without credit line with banks and the profit we will make on the deal will not cover the VAT (total deal is more than GBP 1.000.000 so will end up being a significant number for a small company) from what im told the only way is to pay the VAT when importing, then reclaim it all from IRS how long does it take before we can recover the money, any suggestion of how to finance it all? Is there anyway to not to have to pay VAT on import, since it will all leave the country within a day or two anyway, and since we cant invoice the client for VAT? We would prefer to send goods directly to Spain, but since its cosmetics we will have import goods in UK first since we only have license to do it here....

What can we do?

Dont want to lose the deal...

[David Griffiths]

You can defer payment of VAT, and pay monthly, which may close the gap between laying it out and getting it back if you opt for monthly VAT returns

Link (http://www.hmrc.gov.uk/vat/managing/international/imports/siva.htm) You do have to give financial guarantees, however.

You should note that you can only zero rate the supply of goods to Spain if you customer gives you a valid Spanish VAT number which you show on the face of the invoice. I'm not sure if you can do this while invoicing Singapore. It may pay you to consult a VAT specialist

[consultant]

Are you American?

Why are you importing into the UK and then shipping to spain? Ship direct to Spain.

Supply the goods on a direct basis i.e. FOB or CIF and let the customer clear the goods - you have no vat or duty liability.

If you are not VAT registered, you cannot claim the vat back.

[Littleswede]

The problem we have is that our client dont have to rights to import the cosmetics to EU, he lacks the licensing for it... Therefore we have to bring it all the way, in contrast to our normal deals where we just supply FOB terms... We are only permitted to bring into UK thats why we cant clear it immediately in Spain (unfortunately the "free trade" in EU is not so free as they say, or we could send goods from china directly to Spain and just get the papers from UK to clear them there, but it doesnt work like that...

We are VAT registered so that is not an issue, the issue is that we dont have neither the cash or a credit line to cover the 180.000 VAT bill and wait for months for it to be cleared back into our account...

[consultant]

What license is required to import cometics into the EU?

If you time the import and clearance right, you willnot have to wait months, just a week or two, however, if you do not have the funds even for that time, you still have an issue.

How are you being paid? LC, TT, cash? If LC, I would speak to your bank and ask them for a bridging loan. It will cost, but should cover you.