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Import/ EU VAT

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I hope I can get an answer to my question as I'm lost with all the guidances. We are a UK based VAT registered business buying materials from Germany which get shipped directly from Germany to Italy for further treatment. When finished the goods get imported by our UK based customer from Italy to UK (this is their responsibility). When goods arrive in Italy we invoice our UK based customer charging UK VAT on our sale. The Italian company is actually a supplier to our end customer. We have no trade involvement here and not our responsibility. 

Our German supplier has now said that they need to charge us Italian VAT. The delivery is DAP. I am confused, as I thought that no VAT would be charged until the goods are imported to UK by the end customer. Or am I mixing up things (sale/ purchase)? Yes we hold the ownership of the goods when they get to Italy and I suspect this is the deciding point? As we are not VAT registered in Italy, we won't be able to recover it. 

Any advise is grately appreciated. Or a work around to avoid the Italian VAT. This is a one-off job. 

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By paul.benny
12th May 2022 17:45

Search for the excellent 'Brace for Brexit' articles here. Written by the proper VAT experts here, those articles will answer most of your questions.

Plot spoiler - triangulation is no more and if this is a one off, you're stuffed.

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Replying to paul.benny:
By Leywood
12th May 2022 17:59


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By Jason Croke
12th May 2022 20:35

You said it yourself, you own the goods when they arrive into Italy. You then make a sale of those goods to the Italian company who then process the goods and sell direct to UK customer.

VAT was and always will be about who owns what and you have to really slow it down and look at how your contractual obligations flow, like watching an action scene in a movie, it all happens fast, if you slow it down you can see all the detail of what's going on and so it is with VAT.

It seems Germany is selling goods to you and shipping them to Italy for you and you own those goods when they arrive into Italy. The Germans aren't selling goods to the Italians, they sell them to you and they kindly ship your goods to Italy as a favour. You then sell the goods you own in Italy to the Italian business to process (so this is an Italy to Italy domestic supply) and as you confirmed, the Italians own the goods once they start processing and they ship to the UK as its their customer. They probably ship DAP and so the UK customer liable for import VAT (postponed).

You will need an Italian VAT registration because i) you cannot reclaim the VAT any other way and ii) as a non-Italian business making taxable sales from Italy, the Italian VAT registration threshold is Nil for foreign business and so registration is mandatory, not that anyone in Italy would notice and HMRC will not care as it's nothing to do with them.

Triangulation is no longer possible for a GB based business. A Northern Ireland business could avail of triangulation but would require some setting up in advance.

One of my "Brace for Brexit" articles on the loss of triangulation

There are workarounds but i) none of them are straight forward or quick and ii) planning advice of a detailed nature like this is how Accountants and tax advisors earn a living. It may be easier to just accept the VAT loss on the deal seeing as its a one-off.

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