As a UK Sole Trader that is NOT VAT registered, do I have to charge VAT when selling abroad?

[3 MORE YEARS]

I am looking to sell products using Printiful using Shopify. I am a UK based Sole Trader.

I would like to sell to the following countries:

UK
USA
Canada
Australia
New Zealand
Possibly rest of the world
The VAT/Tax situation is putting me starting this side project. If this business stays under the VAT threshold, and I sell in any of the countries listed above, will I need to charge them VAT?

I am assuming for the UK customers, I won't have to charge VAT as I am not VAT registered and under the threshold.

I realise there are tax experts and this topic can get complicated. But I am hoping given there could be a simple answer.

Thank you.

 

[DontAsk]

If you are not VAT-registered you cannot charge VAT.

If you are VAT registered you do not charge VAT on exports, unless registered in the destination country.

 

[UKSBD]

If you are not VAT-registered you cannot charge VAT.

If you are VAT registered you do not charge VAT on exports, unless registered in the destination country.

Do you have to register for VAT in the destination country if not registered in the UK?

 

[lesvatadvice]

Do you have to register for VAT in the destination country if not registered in the UK?

Yes you do. VAT registration thresholds only apply to local businesses. So, for a UK business selling into any EU country, the obligation to register arises on the first transaction.

 

[DontAsk]

Yes you do. VAT registration thresholds only apply to local businesses. So, for a UK business selling into any EU country, the obligation to register arises on the first transaction.

Really?

 

[3 MORE YEARS]

Yes you do. VAT registration thresholds only apply to local businesses. So, for a UK business selling into any EU country, the obligation to register arises on the first transaction.

Firstly, thank you for your reply. So, you are saying, even though I am NOT Vat registered in the UK and I don't even have a turnover of £100, but I still need to VAT in other European countries?

If you are right, there 99% of the small online businesses are breaking the law, and it almost instantly defeats the benefit of selling outside your country, especially if you are very small and have no major need/want for expansion.

If you are right, which I assume you, then it's very bad for very small online businesses.

 

[DontAsk]

If you are right, which I assume you, then it's very bad for very small online businesses.

Never assume.

 

[3 MORE YEARS]

Never assume.

You are right.

My question still remains. Is this definitely the case. If @lesvatadvice can confirm. Are there any articles by HMRC or other trusted sources that specifically state this.

In my opinion, this makes this very difficult for one-man bands that are not doing it as a full time thing.

 

[3 MORE YEARS]

@lesvatadvice I forgot to thank you. I do appreciate your advice.

The question in this thread relates to more of a side thing, you could say interest of mine. The business was never the main ambition.

However, I do have a main online business, where I would like to offer the service outside the UK as it's a digital product. So, if you do specialise in Vat or e-commerce advice, I would love to get your details via pm. I already have an accountant, so I don't need that. It's more related to trading outside the UK for digital products. If it's not your area, then it's all fine. Thank you.

 

[UKSBD]

You are right.

My question still remains. Is this definitely the case. If @lesvatadvice can confirm. Are there any articles by HMRC or other trusted sources that specifically state this.

In my opinion, this makes this very difficult for one-man bands that are not doing it as a full time thing.

I read about the zero rate threshold not applying to businesses outside the country with the threshold, some time ago and jumped to the same conclusion as you.

How are small business who supply products outside the UK operating legally if it is true?

I've heard people mentioning other counties VAT threshold rates loads of times over the years, so assume most think it applies to them.

 

[UKSBD]

It appears there is a zero threshold for companies not resident in the country

There is an exception for ecommerce businesses who sell Online though

source: 2021 EU VAT registration thresholds - Avalara

 

[japancool]

How are small business who supply products outside the UK operating legally if it is true?

They're not, but the EU doesn't have the power to force those firms to comply - just like the UK doesn't have the power to force foreign firms to do the same in the UK, which they are supposed to do.

If you are selling overseas into a jurisdiction where you should be VAT registered, it is in your interests to register for VAT in the UK, so you can claim back your input VAT.

 

[UKSBD]

One of my businesses is VAT registered in the UK but I've only ever sold 2 products outside the UK and one of those was to a EU country embassy in the UK (Technically classed as their county).

My other non VAT registered business sells Online advertising and I believe there is no threshold on that.

If the place of supply is their country, technically I should be VAT registered in their country, but can I be registered in their country but not the UK?

 

[japancool]

One of my businesses is VAT registered in the UK but I've only ever sold 2 products outside the UK and one of those was to a EU country embassy in the UK (Technically classed as their county).

That's a common belief, but it's not true. Sales to embassies are liable to VAT.
https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-services/vatposs05700

If the place of supply is their country, technically I should be VAT registered in their country, but can I be registered in their country but not the UK?

Yup.

 

[Spur Support Services]

Hi 3
VAT UK is UK goods and sales tax (up to Brexit we applied EU VAT, but now we have more freedom over VAT rules)
VAT EU is the EU goods and sales tax
Other countries have their own GST or VAT

Each country has it's own rules and registration limits on its own tax.
VAT may be collected at the border (import VAT) where it is not collected at point of sale. You may have encountered if you historically source from China for example
Certain counties demand that Online Marketplaces collect the GST or VAT on the sale. THe UK joined these ranks from 1 January 2021 and other EU countries are expected to join them from 1 July 2021. This includes Etsy and Aliexpress, as well as the giants like Amazon and Ebay.
It you warehouse in countries you may be required to register irrespective of the sales level.

Essentially if you export through international eCommerce, life is complex and having the support of your VAT loving accountant on an ongoing basis, rather than just for year end compliance should help you manage the tax risks.

 

[paulears]

As I understand it, those lower limits get removed in the EU in the summer so non-registration is a short respite only. In my case digital consumption abroad is the majority of my earnings from them. I’m registered here so I extract my UK sales and process VAT for that normally. My American sales should mean somebody pay US sales tax, but that is different in each state, and all I know is US. The same applies to other countries. In my case the payment per stream I could sort into countries, but with the quantity that’s not something for the moment, I’m going to do. If or when I get a demand from say Romania, I can find that data and pay them. I am not going to register in over 200 territories that could down download a product, until I need to. I’ll happily pay on request, but until they request, I am not doing anything for non-uk sales. I don’t know who the people are who download products from one income stream as they pay that one through PayPal, the product suggests the UK, so I just do the VAT normally for those, but if I got fifteen pounds and they were in Holland, I simply don’t know!

 

[lesvatadvice]

General comment!
the rules for cross border VAT changed on 1 Jan 2021 and will change again in the EU on 1 July 2021. The rules work differently for ‘goods’ and ‘services.’ You will find a number of specialist firms who can register a UK person in the EU and elsewhere in the world and also submit VAT Returns there. All that comes at a fee, of course.

 

[DontAsk]

And the prize goes to...

VAT may be collected at the border (import VAT) where it is not collected at point of sale.

 

[2JP]

https://www.quipsound.com/brexit-ne...representation-obligations-for-uk-businesses/

https://www.rmboulanger.com/brexit/sell-ddp-in-france/
(the first mention of "I am a UK based business, selling to French clients and to EU customers but France. How can I continue to sell to my EU customers?" is a typo)

 

[DontAsk]

https://www.quipsound.com/brexit-ne...representation-obligations-for-uk-businesses/

https://www.rmboulanger.com/brexit/sell-ddp-in-france/
(the first mention of "I am a UK based business, selling to French clients and to EU customers but France. How can I continue to sell to my EU customers?" is a typo)

Both of those refer to those businesses already established and selling B2B or B2C DDP.

The OP is not (yet) selling DDP.

 

[nick34785]

Yes you do. VAT registration thresholds only apply to local businesses. So, for a UK business selling into any EU country, the obligation to register arises on the first transaction.

This is not correct if the goods is shipped from outside the EU as FOB when the customer import it into the EU.
This might change later this year when the EU has a VAT reform similar to the one UK just went through.

 

[2JP]

Correct. As I was failing to point out with the links, the obligation arises with a DDP-like sale (note incoterms were not really designed for B2C) i.e. whenever the supplier is the importer, but not when the customer is the importer.

When goods import into a country, for VAT purposes, they instantly become like 'virgin' goods about to be 'sold' from the border. The obligation to deliver may rest with the seller but local VAT is applicable on the pretend sale from the border to the customer, and should be paid by the importer or whoever is specified on the freight paperwork.

The country of import is most interested in getting this VAT tax paid, whether or not the entity is VAT registered or not is secondary. They mostly just want the money. VAT registration is mostly for the benefit of the importer because, if they are a business, they can attempt to claim the VAT they paid back only if they have VAT registration in the country of import. Do you think the import country really wants you to reduce the amount of tax they can take?