Do I Have To Charge VAT To Overseas Customers?

This guide reviews how this principle is applied to the sales of goods and services, covering cases involving non-EU companies and EU-based counterparts. Increased awareness of these issues will assist businesses involved in cross-border trade in understanding their obligations.

Understanding ‘place of supply’

The “place of supply” is a critical notion in deciding the VAT cost concerning enterprise offers to customers from overseas. It is also required to determine whether a VAT will be applied and, if so, at what rate.

Normally, a place of supply for the goods is the location where the goods are located – for example, this will be the UK. Services, however, can be more nuanced and rely on the service’s nature. This concept of the place of supply is important for all UK enterprises as it means companies can escape the risk of fines. Businesses can coordinate more complicated overseas trade thanks to the clear concept of the place of supply.

Should I charge VAT on services and goods to companies overseas

Determining VAT for goods and services to overseas businesses involves considering different factors:

• Transaction nature: If you are dealing with physical products, the place of supply is where the seller works. For this reason, UK VAT regulation will be used. At the same time, supply reflects where the consumer is based regarding services. Thus, the VAT regulations of the country where the customer’s company is situated should be used.
• Buyer type: Under the UK VAT Act, any company with a VAT number is a business regarding VAT regulation. However, any individual or company without a VAT number is considered a consumer regardless of whether the business owns it.

VAT on services outside the EU

The UK VAT regulations consider services to countries out of the EU, commonly known as exports, to be outside the scope of VAT. Consequently, most services and goods supplied to non-EU countries are exempted under the VAT class. Businesses transacting with countries outside the EU do not need to account for VAT charges on the services offered. 

For this reason, it is crucial to recognize this exemption since most businesses dealing with cross-border transactions may unnecessarily charge the buyer with VAT or evasively avoid paying taxes.

VAT on services inside the EU

When providing services within the EU, VAT obligations vary based on the type of transaction:

Sales to consumers in the EU:

• VAT at the UK rate of 20% is typically charged on services and supplies to EU businesses.

Supplying goods to an EU business customer (Dispatch):

• Goods dispatched to EU business customers are charged at 0% VAT.
• VAT number of the EU business customer must be included, with Reverse Charge Rules applying.

Selling services to an EU business customer:

• Reverse Charge Rules apply if the EU business customer accounts for the VAT themselves, paying VAT in their respective country.

Make use of Braant’s overseas services

Braant’s overseas services immensely help businesses to deal with complicated international VAT regulations. With our help, businesses can trade with foreign customers within and outside the EU while fully complying with all the applicable VAT requirements.

By using Braant’s accounting services, businesses receive professional help in dealing with VAT, minimising disruptions in cross-border trade and substantially reducing N&BC penalties and risks. Our London-based professionals can help varied companies benefit from optimised VAT strategies, ensuring efficiency and minimising tax responsibilities in the global market.

Cooperation with Braant will help companies overcome the complexity barrier, opening the doors to international trade and expanding opportunities.