Your guide to cross-border taxation
Whilst Brexit has impacted our trading relationships within the EU and further afield, global e-commerce, continues to be a great opportunity for you to grow your business. However, understanding the legal and financial implications remains one of the most ‘taxing’ aspects to consider when it comes to exporting. Your business faces the threat of serious penalties if you fail to register and submit accurate VAT information, so it is vital that you consider carefully what is owed, when it is due, and to whom.
Of course, it goes without saying that you should seek expert guidance from financial advisers & your local tax authority when considering cross-border taxation, but this article looks to outline some key aspects to help you on your export journey.
Every company is different
Cross-border taxation is reliant on so many factors and therein lies the problem. Your company’s location and size, the product or service you are selling and the quantity, the market location you are selling to and their tax rates – these are all factors that will impact on whether VAT is payable and how much might be due – for every company the situation will be different. Not meeting these VAT obligations can result in backdated charges and significant penalties.
Registering for VAT abroad
The location of where goods are sold and delivered play a significant factor in determining VAT - each EU country has a Distance Selling threshold which when exceeded, means the seller is liable to pay VAT in the destination country – see this helpful article which explains this in more detail.
VAT registration applications can usually be made directly through the tax authority website of your destination country, click here to view detailed VAT country guides from around the world.
Once registered, depending on the country, you will need to submit VAT records on an annual, quarterly or monthly basis and the information required will differ, although most declarations will require at least the following:
- Customer information
- Supplier information
- Transaction details (including product type & volumes)
- Details of any exemptions
- Any reverse charges
To avoid the risk of penalties, it is vital that you verify the accuracy of all reports and returns because tax checks are carried out occasionally by all countries. Also when trading in the EU, additional reports may be necessary when moving goods internationally through Intrastat & EC Sales lists.
You must register if, in the last calendar year your business has either moved more than £250,000 worth of goods to other EU countries or received more than £1.5m worth of goods from other EU countries. Find out more about Intrastat, what is involved and how to register & submit declarations.
EC Sales lists
As a UK based VAT-registered business, if you are supplying goods & services to VAT-registered customers in another country, you must inform HM Revenue and Customs (HMRC), about these supplies using an EC Sales list. Find out more about when an ECSL applies.
Economic Operator Registration and Identification numbers are needed if you are importing goods to a country outside of the EU. Your unique number can be obtained alongside VAT registration and will be needed whenever you are dealing with customs. Find out more about what is involved.
It is worth remembering that if you are new to shipping or sending large quantities of goods from the UK, that freight handlers can manage customers clearance on your behalf, assuming they have the relevant VAT registration and EORI information. You can visit the British International Freight Association who a represent more than 1500 UK companies in the logistics and supply chain management sector, for more information.
#VATMoss vs #VATMess
From Jan 2015 changes in legislation meant that any business providing B2C digital services or products within the EU, became subject to VAT regulations known as MOSS (Mini One Stop Shop), although this did not apply to B2B sales. It meant that you now have to pay VAT based on where the customer bought the product, not the country the seller was based in, so with MOSS you could register & pay VAT in one place rather than register & pay VAT with each country you do business with.
This legislation was aimed at stopping big businesses registering in countries with low VAT. However the lack of pricing threshold & the necessity to collect intrusive customer information, such as their IP address, has had a hugely negative affect on a whole swathe of micro businesses trying to do business abroad.
However determined campaigning has brought about some reforms which should come into play in 2018 for digital services and 2021 for digital goods. But until then, you are obliged to fulfill all of the data requirements should you be selling directly to consumers.
Get Help & Advice from the Experts!
To summarise, when trading overseas, your business faces the very real risk of considerable penalties by not complying with international tax regulations, so it goes without saying that you should always seek expert guidance from financial advisers & your local tax authority. This will be especially important in the light of Brexit and the impact this has had on both European and global trading markets for UK exporters.
– Use Kompass Business Data to research and find contacts in your target markets.
– Your Local Chamber of Commerce can help with export documentation and finance.
– UK Export Finance provides trade finance and insurance for exporting.
– B2BCentral works with partners to bring the benefits of B2B eCommerce to British SMEs.
– The Institute of Export gives advice, guidance, offers courses and qualifications.
– Find new export markets with a personalised Market Ranking Report from Kompass.
– Build your brand & global online presence with Kompass Digital Marketing solutions.
At Kompass we have more than 60 years experience, helping businesses grow – providing our customers with business data to help improve the results of their sales and marketing activity and driving relevant enquiries through globally optimised company profiles from more than 7.5M Kompass users. Contact us to find out more about how we can help you as you plan your export strategy.
Our Kompass Export Zone builds on our business information expertise, by giving access to straightforward guidance on some of the key factors to consider when exporting, research advice and country specific market information. For more advice on getting started on your export journey, see our 8 top tips for getting paid when exporting.
Disclaimer: Please note that this blog only contains general information and insights about legal matters. The information is not advice, and should not be treated as such. Kompass.com