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Export from UK with DDP terms - who pays VAT

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Good morning,
We are a Japanese company importing goods from UK to Japan.

With one of our seller, we decided to receive the goods with DDP terms.

We are paying a price VAT INCLUDED (according to their price list - VAT is not specified on the invoice),

so basically we are paying for VAT in UK I guess, and also paying japanese "vat" when we receive the products here.

Being the terms DDP, isn't the seller supposed to pay the VAT in UK? Is it normal that we have to pay for their VAT with ddp terms?

Hope my question is clear.

Best,

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Jason Croke
By Jason Croke
24th Jun 2021 12:29

The UK supplier should be making a zero rated export, so the invoice should show a VAT rate of 0%.

If the seller is shipping DDP to Japan, it means that they will be responsible for any import duty and import taxes/VAT when the goods arrive in Japan. The seller will not be able to recover any of that duty/other taxes and so the duty/taxes are a cost to the seller.

The selling price may factor in the cost of having to pay import duty and import VAT in Japan which the seller cannot reclaim so is a cost to the UK seller which they are passing on. It might be the UK selling prices/website show prices as including VAT but those prices/VAT may be focused on UK customers, usually when a non-UK customer buys from a UK website, the price can be reduced to reflect zero rated export but then increased if shipping DDP.

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Replying to Jason Croke:
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By Ivan123
25th Jun 2021 04:48

Hello Jason,

Many thanks for your support and reply.

I don't know if I have to open a new thread or write here,
however we have another case, still from UK but with DAP terms.

The seller use their account number to ship with their forwarder,
and on the commercial invoice we received, they specified that duties and taxes will be paid by the consignee (us).

The price we paid for the goods, according to the seller price list, still includes the UK VAT.

In this case are we supposed to pay this VAT cost on the goods?

From my knowledge, for exports (for example from Japan to other countries)
we can't charge the buyer for "Japanese vat" as this commercial operation is not inside Japan, and the buyer will pay the VAT they are supposed to pay in their country.

Thank you again for your time and help,
Best regards

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Jason Croke
By Jason Croke
25th Jun 2021 11:13

I think your issue is more to do with the seller has a fixed price which includes VAT and whether the seller sells to UK or Japan, the price is the same.

You need to take that up with the seller, not really a VAT issue, more a pricing issue.

For example, goods listed on website for £120 (£100 net + £20 VAT) and price assumes sale to UK customer. If a non-UK buyer buys, they still pay £120 only this time it is £120 net + £0 VAT, so you are not being charged more VAT, you are being charged more net, the seller makes more margin on sales to non-UK customers.

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Replying to Jason Croke:
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By Ivan123
29th Jun 2021 02:21

Dear Jason,

In the end we solved the problem with the seller, who also agreed on giving a refund on the VAT paid on previous orders. Many thanks for your help!

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