Distance selling VAT?

Distance selling VAT?

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A Chinese company selling to a number of entities in EU including UK. Does distance selling apply.  I understand that if VAT thresholds in each country is exceeded (and in UK no threshold), then the Chinese company should register for VAT in the countries affected.  How do EU tax offices enforce this?????????????.  Currently the buyers are paying import VAT, and there seem to be no issue with tax offices; and the Chinese company doent intend to set up/seen as trading in EU/UK. All the goods are shipped and stored through a shipping agent and buyers pay import VAT. Any suggestions?

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By videfa
27th Aug 2013 15:40

HELP??

Any help??????????

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By dialm4accounts
27th Aug 2013 16:41

What are you selling - and to whom?

Hello,

Firstly a fundamental question - is the Chinese company selling goods or services?

And who are its customers - businesses, or end consumers?

M

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Replying to andy.partridge:
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By videfa
27th Aug 2013 19:36

Thanks. The entitty sells VATable books to businesses.

They are using an non-related shipping agent for warehousing. Does this cross the line or would you have a link to a site that i can check the extent they can go. In addition i see here that a foreign business that seels to UK resident "will need to charge VAT to buyers even if they are not resident in the UK, do not have a UK office or not incorporated in the UK, they will be treated as 'non-established taxable person' (NETP)" http://www.hmrc.gov.uk/briefs/vat/brief3112.htm.- which was my main concern.

Another worry is that the once they are treated as non-establisehd taxable persons - could this have an effect on corporation tax??

I guess another part of the question is, can one escape UK/EU VAT scope if he uses a dropshipping/shipping agent BUT doesnt market nor have sales staff in UK/EU? - which i think is the crux of the matter.

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By Slainge
27th Aug 2013 18:13

Here are my quick thoughts on this

Distant selling only applies to sales by an EU VAT registered businesss selling goods to non business customers established in another EU Member State. So not applicable here.

The real question is where for VAT purposes does Chinese company's sale take place. If the customer is acting as importer and accounting for import VAT then that suggests the sale is happening/title transferring outside the EU with the customer then importing their own goods. However I think there is insufficent information to say this is the case without looking to the sale agreements/T&C's, invoices, Customs documents and inco terms.

Inco terms can be useful (use the right term with the right version as sometimes a Buyer versus Seller responsibility to account for import VAT/import the goods has flipped between versions) but may not always be decisive if there is contradictory evidence in say T&C's. It can also be useful to look at some of the inco pictorial charts (rather than text) as it is easier to see who is responsible for tax/import clearance (all easily found on that great research tool called Google).

But for now you need to do some research to establish the current place of supply of the Chinese company's transactions.

Regards

Slainge

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By DMGbus
27th Aug 2013 19:43

Buyer perspective / the importer

I have a client in the UK who buys goods from China pays the import VAT and duty.
So no UK tax issues arise for the Chinese suppliers.

Now, if the Chinese supplier had a sales force in the UK or a warehouse on UK soil, then it starts to look more like the Chinese supplier being the importer, but looks like neither apply in the stated query.

PS. Distance selling is, so far as I see it, more to do with selling to consumers in the UK rather than to trade buyers, and from another EC country.

 

 

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Replying to Andrew_hound:
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By videfa
27th Aug 2013 19:34

Thanks

See above

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By DMGbus
27th Aug 2013 19:42

Books zero rated (usually)

If the books and periodicals are supplied in printed form (as opposed to electronic  or non-printed media form) then they are, at least in the UK, zero-rated VAT.

I can't advise on the import duty as it's not something that I've studied.

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By DMGbus
27th Aug 2013 19:46

VAT relief for charity imports

See if the charities qualify, if they continue to import the goods...

http://www.hmrc.gov.uk/charities/vat/import.htm

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By shaun king
27th Aug 2013 22:38

Inco terms

I have a number of non EU clients who sell to customers in the EU and from your question it appears that the sale by the Chinese company is DDU (Deliver Duty Unpaid) in which case it is the customers responsibility to declare the books as the Importer of record and the customer becomes liable for the Customs Duty (unlikely if books) and VAT. Although if they are books then they are Zero rated when imported.

The biggest problem with selling goods DDU is if the customer is unaware that they are responsible for the Duty and VAT. I have immense problems with non EU suppliers explaining that there is a 20% VAT charge in addition to the price they quote the customer without any additional Duty cost. Hence why non EU suppliers find they have a high returned goods ratio as the customer refuses to pay a minimum of 20%.

If the Chinese company was to quote DDP (Delivery Duty Paid) then they would need to register for UK VAT.

Distance selling does not apply in this instance, as the goods are not being delivered from an EU Member State to another for the benefit of non VAT registered persons. Distance selling could apply if the goods were entered DDP and then delivered from stock in the UK to private individuals in other Member States if the value of sales exceeded the Distance Selling thresholds.

Although Customs Duty may be applicable to the goods it will only apply if the value of the goods in the consignment exceeds £135.

There are further complications if the goods enter the UK for other Member States but as that doesn't seem to apply here - best leave that for another day!! 

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By kross
28th Aug 2013 09:40

Incoterms are a useful addition to the list of tools that can help in import and export transactions, but like all tools they need to be used with care. Incoterms are controlled by the ICC (International Chamber of Commerce), revised about once every 10 years and the latest revision is known as INCOTERMS 2010. In this revision the DDU (Delivery Duty Unpaid) term was abolished. When quoting "Incoterms" in any contracts or other documents it is advisable to add the revision date i.e. "Incoterms 2000" or "Incoterms 2010" as otherwise the usage of Incoterms may not be effective. There were other changes in addition to the removal of DDU.

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