Exporting to the EU since the U.K. left the bloc has been unclear for some, but frustrating and problematic for most with a changing of the rules and requirements.
If the place of supply is from the U.K., then generally speaking, if you make B2B supplies, your customer would normally be expected to account for the VAT on import, which would be charged by customs at the point of import. Preferential treatment means that there is 0% tariff but this is dependent on the rules of origin (see below).
Employing a good freight forwarder can make sure you are paying the correct duties, taxes and will supply the correct paperwork. Hopefully, you have already got your EORI numbers (starting GB & XI where appropriate), and regarding imports, have also registered for CDS and are taking advantage of “Postponed VAT Accounting”.
If you make B2C supplies of goods, you could opt for ‘Delivered at Place’ (DAP) / ‘Delivered Duty Unpaid’ (DDU) – where only the net price and delivery costs would be shown, and the customer would be liable to pay the VAT and any applicable customs duties (U.K. VAT until end of June and then local VAT after that, dependent on whether distance selling thresholds country by country are exceeded per calendar year, for example Germany is €100k. Distance selling thresholds will also be abolished at the end of June). Awkward when trying to provide a great customer experience, but can be negated somewhat by quoting the customer the full expected value in advance with an explanation as to why, if you so choose.
The above is a better option in my opinion than ‘Delivered Duty Paid’ (DDP) and the implications that comes with it, as you would then be required to register and pay the VAT in the country of the customer – and / or use an agent. However, this may change as your business evolves and rules change post June 2021.
From EU to U.K., sellers will not charge VAT, but buyers will have to pay VAT to HMRC at the point of import (alongside any applicable customs duties). You can delay customs import declarations for up to 6 months until end of June, but you must apply and set up a duty deferment account.
Things to consider:
- In pricing your inventory, have you attributed the appropriate duty rates, freight, insurance, sourcing fees, etc. on top of the FOB to calculate the landed costs for each of your products to get the true cost of your inventory?
- Check your Incoterms
- Are there any restrictions in the destination markets on the origin of the materials you have used in the fabrication or can you use preferential rates of duty?
- Have you correctly determined the classification of your goods using the Harmonized System (HS)?
- What is the value of the consignment being exported (>£39 or <>£135)?
- Are you classified as an Online Marketplace (OMP) and as such, responsible for collecting and accounting for VAT?
We hope this goes someway to demystifying some of the implications surrounding exporting to the EU. Whilst this is correct at the time of writing for goods post 1st January 2021, this is subject to change as the government continues to release updates.
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