D-5- Value added tax, VAT, in United kingdom

Each time a buyer is doing a transaction abroad, he has to pay the VAT in his country. The payment's objective is to avoid what could be considered unfair competition between a product made in England and subject to VAT, and a product coming from abroad.

5-1- Customs : a collector of VAT for imports

The first administrative institution that the goods will have to go through is customs. The VAT will be collected there.

5-2- VAT related to intra-community trade

With the establishment of free movement of goods in 1993, and the removal of customs duty, it has been necessary to set up systems that allow VAT payment outside of customs offices in several scenarios.
  • VAT Due for the intra-Community exportation
    Here, the exporter is exempted from paying the VAT for an intra-community transaction
  • VAT due on the intra-community importation
    While the VAT payment for transactions taking place outside the European Union must be done through the Customs, the VAT payment for an intra-community transaction must be done through the customs and the tax administration of the importing country.
European companies now have the benefit of their own tax identification number, which is delivered by the fiscal administration from their country. The identification number must be indicated on all invoices and company VAT declarations. This identification number is searchable via /Europa.eu.int, the taxation and customs union sector.

5-3- VAT exemption

However, it is possible that the transaction is exempted from VAT, as in the following examples: samples shipment, transactions with a third country and transactions where the final destination of the imported goods is another member state of the European community.

5-4- VAT in a non-European Union country

  • Export transactions to the non-EU countries
    They are exempt from VAT using a simple declaration. This declaration is certified by Customs, and the exporter must indicate the entire amount to be taken into consideration.
  • VAT when importing from non-EU countries
    It is collected by customs upon importation.

5-5- VAT on e-commerce

E-commerce encompasses computer systems, web hosting providers, website creation, software maintenance, and/or e-learning. In that case, payable VAT is:
  • When the services are provided by a non-EU country to a customer in the EU, they are subject to VAT.
  • when the services are provided to a non-EU country: The place of taxation is the client's resident country.
  • when the services are provided by an EU country to an EU country: the place of taxation is the place where the company is located.
  • when the services are provided within the same state: the place of taxation is where the service provider is located.