Billing VAT on across border sales ?

[krooga]

Hello all,
This is my first post on this forum and I hope you will be able to help me clarify a few issues in relation to billing VAT.

As this is my first business (LTD), please forgive my ignorance.

My business is an Internet Marketing business, trading with international clients helping them promote their goods and services online. As part of those transactions I will be buying digital goods and services mainly from the US and India (Outsourcing), I will then sell my services to clients in countries ranging from France to Spain and the United States.

Taking the example of France, do I bill the 17.5% rate or the french 19.5% rate ? How do the deductions work when buying from countries such as the US or India (Outside the EU?)

Would you recommend any books to get my knowledge on accountacy and in particularly taxes up to scratch ?

Thanks in advance for your help,

Sam

PS: On a sidenote, if you need advice on marketing your products or anything in relation to selling online i'm your man ;-)

 

[dagr]

I'll have a go at this, but it would be better if someone more qualified confirmed/corrected it. To keep things simple, I've assumed every business entity (customer, supplier) is VAT registered.

A) IMPORTING GOODS FROM OUTSIDE E.U.
Your supplier's invoice to you will not have VAT nor Sales tax. However, you will have to pay HM Customs VAT and, depending on type of goods, possibly duty on arrival. Typically, you'd pay the freight company the VAT/duty who would pass this on to HM Customs. You can apply for a Pseudo Turn number if you're not yet VAT registered in order to get the goods out of Customs, but the VAT must still be paid before you can get your hands on the goods.

There are one or two exceptions to this, where payment of VAT can be avoided or deferred, for example, if you re-export the goods.

B) IMPORTING GOODS FROM ANOTHER E.U. COUNTRY
Both you and your supplier must have an EU VAT reg number. The supplier will not put any VAT on the invoice, but you will have to pay VAT at the going rate in your country (ie where the goods are delivered to).

C) EXPORTING GOODS TO A COUNTRY OUTSIDE THE E.U.
Your invoice to your customer will not have VAT on it, and you do not collect or pay VAT. You must keep proof of this export for your accounts (some sort of export document - forget the name in the UK - typically stamped by Customs. Don't lose it or you'll be charged with VAT evasion!)

D) EXPORTING GOODS TO ANOTHER E.U. COUNTRY
You must ensure you have your customer's EU VAT reg. number. Your invoice to your customer will not have VAT on it. (It's up to your customer to pay the local VAT on their end).

E to ZZZZ) SERVICES
Cross border services are a pain to explain and deal with, and even your accountant may not know exactly what to do about VAT. Basically, there are two types of service:
i) Services that are location specific (e.g. surveying a building, organising a congress/seminar, inspecting machinery at a plant, local transport costs, etc)
ii) Services that are non-geographically specific (e.g. patents, licensing rights, data processing, consulting, bookkeeping, financial transactions, telecom services, etc).

In case i), VAT is due and collected in the country where the location is. This is a pain because if a UK company pays for a booth at an exhibition in France or Germany say, then the VAT will have to be paid in that country, yet cannot be reclaimed (unless you have a company in that country).

Case ii) is a minefield. To answer this even semi-correctly, you have to know where the service provider is located (same country, other E.U. country, outside E.U.), and what makes matters worse is the definition of "located" (an office?, a subsidiary?, ...). Likewise you have to know where the customer is located (same country, E.U., etc.). In general, between two E.U. countries, the VAT will be paid by the customer in their own country, a bit like goods. Similarly, if your customer is outside the E.U., then don't put VAT on the invoice and don't collect or pay VAT. Because there is no trace of an export, you may get some hassle as to why you're not collecting VAT. Just make sure you have all the required documents concerning your overseas customers (P.O., Order confirmation, EU VAT reg. if applicable, general customer info, etc.)

If one of the entities is not VAT registered in their own country, then it becomes nightmare-ish as the onus of collecting VAT may switch from customer to service provider.

Hope this helps a bit and hasn't confused you too much. Your chamber of commerce or other business help centre should have hard info on all this.

David.

PS: VAT in France is 19.6% (not 19.5%).