VAT and EU importing

VAT and EU importing

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Hey everyone. I am new to business but I have a good business idea that would involve me importing from the EU (Spain). I am considering opening a VAT-registered company but first I would like to understand how the VAT works. Please let me know if any of the below is wrong at all....

So let's say I will be purchasing the product for £10 each with delivery from Spain. Including 21% Spain VAT, I will need to pay £12.10 per product (extra £2.10). Then when it arrives in the UK I will need to pay UK VAT on import making the cost £12.1 x 1.2 = £14.52 (another £2.42).

Now let's say I sell it for £20 each. That means the price excl VAT would be £16.67 right? I would keep £16.67 for myself and pay £3.33 to HMRC.

So my questions are -- does this mean I can claim back the £4.52 (VAT in Spain and import) and pay £3.33? If so, would that mean that HMRC actually pay me back money in the VAT return? So the overall cost of the product would be cheaper by the difference (making it £8.81) in the long run?

Sorry if these questions are very basic - I'm just trying to figure out how this all works! I would really appreciate any help. Thanks for taking the time to read through.

Replies (7)

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By Wanderer
21st May 2016 18:28

In General terms, the Spanish company won't charge VAT to you nor will you pay it on import so you end up just paying £10 to your Spanish supplier & out of your £20 you pay the £3.33 to UK HMRC.

Few caveats to the above but don't want to overcomplicate at this stage.

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Replying to Wanderer:
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By bonobomaster
21st May 2016 18:34

I see. So in this instance, would it be worth to hold off from VAT registering until I reach the 81k threshold?
Out of interest, why do I not have to pay VAT on import? I'm planning to make purchases of £500+. Thanks for the help.

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Replying to bonobomaster:
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By Wanderer
22nd May 2016 05:26

bonobomaster wrote:

I see. So in this instance, would it be worth to hold off from VAT registering until I reach the 81k threshold?

Possibly, depends who you are selling to. If you are selling to non VAT registered persons, i.e. retail then you are probably better off not registering until it is compulsory.
bonobomaster wrote:
Out of interest, why do I not have to pay VAT on import? I'm planning to make purchases of £500+. Thanks for the help.

Because you are importing from another EU country.
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By shaun king
22nd May 2016 18:10

Bit of a worry when contributors respond and don't realise the VAT regiostration limit is £83k not £81k. Not to mention that there is no such thing as an import from Spain and there will be acquisition VAT or maybe not, depending on the circumstances.

You just can't beat paid advice if you are starting up business

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Replying to shaun king:
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By Wanderer
22nd May 2016 18:44

shaun king wrote:

Bit of a worry when contributors respond and don't realise the VAT regiostration limit is £83k not £81k. Not to mention that there is no such thing as an import from Spain and there will be acquisition VAT or maybe not, depending on the circumstances.

You just can't beat paid advice if you are starting up business


Well a response that doesn't really help the OP.

Just because I haven't commented on the registration limit quoted by the OP doesn't mean I don't know it.

No such thing as an import from Spain?? How about this quote:-

Quote:
VAT on the movement of goods and services within the EU
There is less admin involved in acquisitions (goods imported into the UK) and dispatches (goods exported from the UK) to and from other EU countries than with countries in the rest of the world.

from here:-
https://www.gov.uk/guidance/trading-in-the-eu

Of course we all know the term 'acquisitions' but would using that term help or confuse the OP?

Obviously the whole situation including whether to look at voluntary registration or not would involve a detailed discussion & understanding of the OP's situation.

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RLI
By lionofludesch
23rd May 2016 08:27

The priority here is to establish whether it's beneficial for the OP to register for VAT or not.

Will he be supplying to unregistered or registered people?

Details like registration thresholds may not even be relevant.

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Replying to lionofludesch:
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By bonobomaster
23rd May 2016 09:33

lionofludesch wrote:

The priority here is to establish whether it's beneficial for the OP to register for VAT or not.

Will he be supplying to unregistered or registered people?

Details like registration thresholds may not even be relevant.


I'm going to be selling mainly on Amazon, so to unregistered people.
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