Shipping charges and VAT - how to calculate?

[schmexit]

When sending parcels to the EU, how should VAT be calculated?

For example, let's say I send £100 with of goods and I charge the customer £20 for pick/pack/postage (£120 total). However, the shipping company charges me £10.

Should the VAT the recipient pays be calculated on £120 or £110?

Thanks!

 

[Mr D]

The buyer is paying you.
The amount they pay is on what they pay. Your costs are irrelevant to your buyer.
Think of the other £10 as the pick & pack portion if you want.

 

[schmexit]

The buyer is paying you.
The amount they pay is on what they pay. Your costs are irrelevant to your buyer.
Think of the other £10 as the pick & pack portion if you want.

That's what I thought. However, a parcel broker I use says:

The VAT is charged on the costs of carriage that you pay to us because you do not pay VAT to us on international shipments any longer.

If the recipient pays VAT on the costs of shipping you charge your customer, then the correct amount of VAT would not be paid.

 

[Legal Utopia]

For the UK, you can calculate import VAT from the government website by searching Vat rates: vat rates - should be the first

This shows what you can put VAT on (the parcel) and how to finally calculate how much import VAT is due. However you do not pay import VAT if you sell from a online marketplace.

"You have to pay a standard rate of import VAT on most items. This is currently 20% of its value."
So if it was full rate of total goods is 100 it would be 100%20 = 20, so the price would be £120.

But this is for imports to the UK, each country in the EU will have its own rates/rules

 

[schmexit]

For the UK, you can calculate import VAT from the government website by searching Vat rates: vat rates - should be the first

This shows what you can put VAT on (the parcel) and how to finally calculate how much import VAT is due. However you do not pay import VAT if you sell from a online marketplace.

"You have to pay a standard rate of import VAT on most items. This is currently 20% of its value."
So if it was full rate of total goods is 100 it would be 100%20 = 20, so the price would be £120.

But this is for imports to the UK, each country in the EU will have its own rates/rules

Yes - I am asking about exporting from the UK to the EU.

 

[Mr D]

That's what I thought. However, a parcel broker I use says:

The VAT is charged on the costs of carriage that you pay to us because you do not pay VAT to us on international shipments any longer.

If the recipient pays VAT on the costs of shipping you charge your customer, then the correct amount of VAT would not be paid.

Yes he's talking about the VAT on their service, which presumably your buyer is not paying them?

 

[schmexit]

Yes he's talking about the VAT on their service, which presumably your buyer is not paying them?

Exactly. I am paying that.

Parcel2go also said:

"I do understand your point however you do not pay VAT to Parcel2Go on the services you purchase as VAT becomes applicable at the point the goods are imported, and so it's not UK VAT.

As it's EU VAT, the recipient has to pay this, as they are the importer. If they do not pay VAT on the entire costs of shipping, only what you charge them, then there will be a deficit as I have previously explained and someone would owe the EU the remaining VAT.

Unfortunately, your issue is not something that we can change. We are bound by the rules set up in the trade agreement between the EU and UK."

This does not seem right.

 

[The Soup Dragon]

I assume you will be adding a commercial invoice to your parcel? This states the value of the goods being sold not including shipping charges and it is my understanding that VAT / duties would be levied on that value.

 

[DefinitelyMaybeUK]

Well i'm confused - but I wouldn't take parcel2go's word for it - aren't they the same people that assume all your goods are from the one country of origin when you're booking the shipment?

Pre-brexit, an EU buyer paid UK VAT on the price of goods *and* shipping charged by the UK seller - the same scenario should apply now, be it a DDU sale or DDP sale, albeit at the local VAT rate. UPS quite happily charges VAT on the declared shipping price - they also proportion the shipping price to items when calculating any tariff due and charge you VAT on that too. Whether they charge you the correct tariff seems hit and miss, and DHL seem to only allow UK free trade tariff *only* if you can include a preference statement on the commercial invoice...

 

[The Soup Dragon]

We ship stuff to lots of countries and use the main courier companies. To date they are all making a mess of it from time to time except DHL who just seem to be doing the job. Not the cheapest but touch wood so far no issues. We have a DHL account and also an account with Inxpress which we use to book via DHL as it is often cheaper. Transglobal ( DHL) is often a good deal too.

 

[Deleted member 335660]

When sending parcels to the EU, how should VAT be calculated?

For example, let's say I send £100 with of goods and I charge the customer £20 for pick/pack/postage (£120 total). However, the shipping company charges me £10.

Should the VAT the recipient pays be calculated on £120 or £110?

Thanks!

Hi Schmexit,

I think the courier is getting things mixed up as they are talking about import and you are not importing.

We are in Spain and our UK suppliers invoice us excluding VAT on goods and shipping.

When it arrives at Spanish customs the courier contacts us and we pay them the Spanish VAT and they then deliver. Some packages arrive without this intervention and we then pay Spanish VAT on these imports when we do our quarterly return.

What the courier charges you for shipping is nothing do with your customer and you will pay UK VAT on this charge. You claim the VAT back as you do with any other expense.

If your customer is not VAT registered ( I.e. ordinary individual) then they may have same situation.

 

[DefinitelyMaybeUK]

What the courier charges you for shipping is nothing do with your customer and you will pay UK VAT on this charge. You claim the VAT back as you do with any other expense.

For shipping outside the UK, no VAT is charged by the couriers, so nothing to claim back. It used to be the case for EU destinations pre-brexit, but now just like anywhere else. If vat was charged by the couriers and a seller wasn't Vat registered, then the customer would pay vat on vat, which wouldn't be right.

 

[schmexit]

I assume you will be adding a commercial invoice to your parcel? This states the value of the goods being sold not including shipping charges and it is my understanding that VAT / duties would be levied on that value.

Hmm. Shouldn't the commercial invoice show what the EU customer paid us in total, which would include the shipping fee? I'm talking about the shipping fee they pay to us, not what we pay to the courier.

The issue is that a number of online couriers/brokers now submit all this electronically, so there's no paperwork.

 

[schmexit]

Hi Schmexit,

I think the courier is getting things mixed up as they are talking about import and you are not importing.

We are in Spain and our UK suppliers invoice us excluding VAT on goods and shipping.

When it arrives at Spanish customs the courier contacts us and we pay them the Spanish VAT and they then deliver. Some packages arrive without this intervention and we then pay Spanish VAT on these imports when we do our quarterly return.

What the courier charges you for shipping is nothing do with your customer and you will pay UK VAT on this charge. You claim the VAT back as you do with any other expense.

If your customer is not VAT registered ( I.e. ordinary individual) then they may have same situation.

Thanks for that.

When you say "We are in Spain and our UK suppliers invoice us excluding VAT on goods and shipping", do you mean excluding VAT but on the total cost of goods + shipping?

Parcel2go say:

"We cannot charge you VAT for International / European shipments as the VAT for this is payable in the EU.

As such, VAT is payable by the recipient.

The recipient is the importer and therefore responsible for any VAT applicable to the service and / or goods."

 

[LPB 123]

You could start charging the customer the same rates as you're paying to avoid any discrepancy with Parcel2go and build the pick and pack element in to your pricing.

Or use couriers directly with an account as they will submit the item cost and shipping cost that you charged the buyer, they won't use the shipping charge you actually have with them for customs info which is what Parcel2go are doing for some reason.

 

[schmexit]

You could start charging the customer the same rates as you're paying to avoid any discrepancy with Parcel2go and build the pick and pack element in to your pricing.

Or use couriers directly with an account as they will submit the item cost and shipping cost that you charged the buyer, they won't use the shipping charge you actually have with them for customs info which is what Parcel2go are doing for some reason.

I can't really do that, as the cost of picking/packing needs to be included in the overall shipping price we charge them.

I have thought about using couriers directly, but the prices are prohibitively high.

 

[Deleted member 335660]

For shipping outside the UK, no VAT is charged by the couriers, so nothing to claim back. It used to be the case for EU destinations pre-brexit, but now just like anywhere else. If vat was charged by the couriers and a seller wasn't Vat registered, then the customer would pay vat on vat, which wouldn't be right.

I think you need to distinguish between what you charge the seller and what the courier charges you.
DHL invoice my business in Spain and charge me Spanish VAT. The Charges on my website are rounded up and the seller pays me.

 

[schmexit]

I think you need to distinguish between what you charge the seller and what the courier charges you.
DHL invoice my business in Spain and charge me Spanish VAT. The Charges on my website are rounded up and the seller pays me.

I do distinguish between those. However, it seems there's confusion, especially when it comes to 3rd party courier brokers, as to how this should be declared and taxed.

 

[Deleted member 335660]

I do distinguish between those. However, it seems there's confusion, especially when it comes to 3rd party courier brokers, as to how this should be declared and taxed.

Fine, I have not use 3rd party but can understand confusion is part of the Brexit benefit (smile).