VAT on China orders via Alibaba

[boogieboa]

I’m based in the UK and order items from China via Alibaba. Can I get tax exemption on purchases for resale if my business is not registered for VAT?

 

[MOIC]

I’m based in the UK and order items from China via Alibaba. Can I get tax exemption on purchases for resale if my business is not registered for VAT?

Not unless your products are zero VAT rated.

 

[WaveJumper]

Some home work on importing and possible duties:

Tax and customs for goods sent from abroad

VAT, duty and customs declarations for goods received by post or courier - paying, collecting your goods, getting a refund and documents.

www.gov.uk

 

[Customs Geek]

You can reclaim import VAT if you are the goods owner and registered for VAT. But you also have to charge VAT on your sales then pay that over to HRMC.

So if you are not VAT registered you cannot reclaim you paid VAT on your purchases (including import VAT) but then you don’t charge VAT on your sales either.

 

[CHUKTC]

As stated above you cannot avoid paying UK import taxes including VAT (unless zero rated). But you have the advantage as stated above that you do not charge VAT on sales to customers - which works to your advantage as presumably you sell at higher price than your income costs - thus educing the ammount of VAT on the whole transaction..

 

[OlegP]

I’m based in the UK and order items from China via Alibaba. Can I get tax exemption on purchases for resale if my business is not registered for VAT?

I wanted to ask, are you charged VAT by the Alibaba or by Customs?
I've made my first order through Alibaba, paid first 50% and my order soon to be ready and I will be due to pay the remainder.
But Alibaba keeps reminding me to submit tax information to be verified for tax exemption. Does this mean that Alibaba is going to charge me VAT on top of the cost that I already paid to my supplier?
I was sure that I will pay VAT, alongside with customs duty to HMRC when importing to the UK, won't I?
(just for the context - I'm a sole trader and not VAT registered, so anyway I can't provide my VAT number to the Alibaba).

I wanted to ask someone who has already ordered items from Alibaba, how this normally happens? I'm worried that I can get charged VAT twice.

UPD: I think I've already found the answer in another thread (unfortunately can't post the link here)
Looks like for orders above £134 (mine - is around £1K), Alibaba shouldn't charge VAT, and it is done by HMRC.

 

[CHUKTC]

Alibaba is just a trading platform not your supplier and shouldn't be charging you anything. Your supplier will not be able to pay the import taxes for you unless you are paying them to ship and they have agreed to ship under DDP terms in which case yes the shipper pays the taxes. Sometimes it China Tax they are talking about - if it's exported (which it is) they are in threory at least able to reclaim China taxes but it depends how it's put throught heir accounts. A few unscupulous sellers try to charge "UK VAT" as a way of raising extra revenue!

 

[japancool]

Alibaba is just a trading platform not your supplier and shouldn't be charging you anything. Your supplier will not be able to pay the import taxes for you unless you are paying them to ship and they have agreed to ship under DDP terms in which case yes the shipper pays the taxes. Sometimes it China Tax they are talking about - if it's exported (which it is) they are in threory at least able to reclaim China taxes but it depends how it's put throught heir accounts. A few unscupulous sellers try to charge "UK VAT" as a way of raising extra revenue!

That's not entirely true. According to UK law, a marketplace, such as Alibaba is responsible for collecting UK VAT and remitting it to HMRC, and I believe Alibaba are registered to do so.

 

[paulears]

If you provide Alibaba your UK VAT registration number then most orders are invoiced with no VAT charged at all, and depending on the type of goods, value and size, it may simply be delivered via Fedex or UPS if small enough, and they won't even charge you the handling fee as they have not paid the VAT on your behalf. However, I have a couple of regular suppliers who get orders to the value of 1-2 grand, and they ALWAYS charge me the VAT - I assume this is to do with their contract with Alibaba. It doesn't matter because if VAT is charged at the point of import, a few months later it balances out. Larger orders on Aliexpress often get processed in a similar way - no VAT charged. If you pay direct rather than through Alibaba, VAT is always added in my experience, so a bank transfer practically makes the adding of VAT standard.

 

[japancool]

It doesn't matter because if VAT is charged at the point of import, a few months later it balances out.

How so? If they charge you vat, and customs also charge you vat, you're paying twice, unless it's being sent DDP.

 

[paulears]

They have the option to use the declaration to show tax has been paid, or to allow the shipping company to charge it, or to show that no tax has been paid and the shipping company doesn't charge. Alibaba have a GB VAT number, so can easily do the tax over there. Strictly speaking I have been told, if it enters the country without the VAT being levied, you should voluntarily add this to your accounts, and pay it over next quarter, then reclaim it the next - I've not discovered anyone actually doing this because the net result is £0 and it's a lot of messing around. However - you are supposed to do it this way.

 

[Customs Geek]

They have the option to use the declaration to show tax has been paid, or to allow the shipping company to charge it, or to show that no tax has been paid and the shipping company doesn't charge. Alibaba have a GB VAT number, so can easily do the tax over there. Strictly speaking I have been told, if it enters the country without the VAT being levied, you should voluntarily add this to your accounts, and pay it over next quarter, then reclaim it the next - I've not discovered anyone actually doing this because the net result is £0 and it's a lot of messing around. However - you are supposed to do it this way.

There are various ways for import VAT to be accounted for. I have outlined the most commonly encountered by infrequent importers.
1. The market place must charge UK VAT if the shipment is below £135. So this will be charged on the invoice value. No Import VAT or import duty is charged.

2. shipments over £135 will incur import VAT ( unless zero rated ) and possibly import duty
a) Non vat registered persons will be charged import VAT which needs to be paid at import before goods are released from customs. In practice if a courier is used they will pay the VAT on your behalf and then ask you for payment. If there is duty to pay this will be accounted for the same way.
b) VAT registered persons may pay the import V AT as above or use postponed VAT accounting. This means that VAT is not physically paid but accounted for as input and output VAT on your next VAT return. You will need to download your monthly VAT statement from HMRC. Most couriers will use postponed VAT accounting as the default unless you opt out. Duty if applicable will be charged.

Couriers may also add their own fees for collecting the VAT and duty.

 

[japancool]

1. The market place must charge UK VAT if the shipment is below £135. So this will be charged on the invoice value. No Import VAT or import duty is charged.

2. shipments over £135 will incur import VAT ( unless zero rated ) and possibly import duty
a) Non vat registered persons will be charged import VAT which needs to be paid at import before goods are released from customs. In practice if a courier is used they will pay the VAT on your behalf and then ask you for payment. If there is duty to pay this will be accounted for the same way.

This doesn't square with an Alibaba seller charging UK VAT on an order worth 1-2k. As far as I know, in this case, VAT should be assessed at the point of import.

 

[Customs Geek]

This doesn't square with an Alibaba seller charging UK VAT on an order worth 1-2k. As far as I know, in this case, VAT should be assessed at the point of import.

Exactly it makes no sense that Alibaba should or could legitimately charge UK VAT on an order of that size.

 

[paulears]

Indeed and of course the items over that lower limit that get delivered without charges and dont seem to add to the quoted price which should attract 20% somewhere!

 

[Customs Geek]

That very much sounds like the effect of the couriers using postponed import VAT as their default if an importer s VAT no is provided to them. It does look like no VAT is chargeable because it is postponed and instead accounted for on your VAT return.
As the statements also have to be downloaded by the importer from CDS it’s probable that many importers are not aware of this so it just looks like no VAT is applied.

It is an accounting exercise as in most cases no actual VAT is paid.

 

[paulears]

Ha! I'm glad it's so easy to understand. I'm working on the assumption that there is no VAT to reclaim unless it is shown own the invoice, with a GB VAT number - I suppose I might actually lose a few of the shipments where VAT may well have been added but poorly documented. In fairness, getting VAT invoices from Fedex, UPS etc is actually quite difficult, and usually mean an email request. Frustrating way to do business reliably, isn't it!