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VAT on sale to UK entity but delivered to France

Do I charge VAT if company subsidiary is also registered for VAT in France?

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A client has shipped goods to France but is invoicing a UK entity. The company has a French subsidiary which is registered for VAT in France. Their accountant is insisting that VAT shouldnt be charged and has provided the French VAT number. I would have thought this is wrong as the contract is with the UK company, irrepsective of where the goods are being delivered to. Am I wrong?

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chips_at_mattersey
By Les Howard
14th Aug 2020 16:07

The Place of Supply is where the goods are physically delivered to, so zero-rating applies, subject to the evidence of departure and arrival, as well as recipient's VRN.

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Replying to leshoward:
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By spidersong
14th Aug 2020 17:30

I though the place of supply was where goods were despatched from not delivered as per S7, 7 (a) VAT Act 1994. And as per HMRC's Place of Supply guidance(https://www.gov.uk/hmrc-internal-manuals/vat-place-of-supply-goods/vatpo...) which says: Under section 7(7)(a) a supply involving the removal of goods from the UK to another EC Member State takes place in the UK.

So this would be within the Scope of UK VAT. Which presumably means the Zero Rating provision in question would be 30 (8) which says ZR applies "in cases where:...the supply in question involves both...the removal of the goods from the United Kingdom; and their acquisition in another member State by a person who is liable for VAT on the acquisition in accordance with provisions of the law of that member State"
but as this is the acquisition in France is by a UK company I'm not convinced that under French law the UK company is liable for VAT on that acquisition?

So to me this is a UK supply, to a UK company, and the fact that the goods are sent elsewhere in the EU seems irrelevant to the suppliers position. If the supply was to the French subsidiary then I'd say that ZR could apply, but that doesn't seem to be the case.

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Replying to spidersong:
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By Echo761
19th Aug 2020 14:42

Interestingly in terms of Indirect Exports, VAT Notice 703 states;

"2.12 If you supply goods to an overseas customer who is also established in the UK
(a) Where you supply goods for export outside the UK or EU, and your customer has an establishment in the UK from where they make taxable supplies, you may zero rate the supply as a direct export provided all of the following apply:

you or your representative arranges for the goods to be sent directly to a non-UK or non-EU country
the overseas delivery address for the goods is shown on the invoice even if the invoice is made out or sent to the address of the UK establishment, or a UK Shared Service Centre for administrative reasons
the conditions, time limits and evidential requirements for direct exports are met - see paragraph 3.3"

Compare and contrast....

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By paul.benny
14th Aug 2020 18:11

Your reasoning is faulty: the ship-to address determines the liability of the seller to account for VAT. The identity of the contracting party is irrelevant.

s7(5) is relevant here; s7(7) only covers goods not dealt with with in preceding sections of the Act. Mr/s spidersong is mistaken.

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Replying to paul.benny:
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By spidersong
17th Aug 2020 13:20

How is 7 (5) Relevant?:
(a)the supply involves the removal of the goods, by or under the directions of the person who supplies them, to another member State; [true in this case]
(b) the person who makes the supply is taxable in another member State; [Not true] and
(c) provisions of the law of that member State corresponding, in relation to that member State, to the provisions made by subsection (4) above make that person liable to VAT on the supply; [not true as the UK recipient isn't paying tax in another member state]

So it looks to me that the conditions in 7 (5) aren't met.

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chips_at_mattersey
By Les Howard
15th Aug 2020 11:27

VAT is a complicated thing!

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