VAT on exports of goods to non-EU countries
VAT is a tax charged on goods used in the EU, so if goods are exported outside the EU, VAT isn't charged. You can zero-rate the sale, provided you get and keep evidence of the export, and comply with all other laws. You must also make sure the goods are exported, and you must get the evidence, within three months from the time of sale. This can be longer for goods that need processing before export and for thoroughbred racehorses.
The time of sale is the earlier of:
•the day you send the goods to your customer
•the day you receive full payment for them (if earlier)
You mustn't zero-rate sales if your customer asks for them to be delivered to a UK address. If the customer arranges to collect them from you - an indirect export - you may be able to zero-rate the sale as long as certain conditions are met.
1.6 What is the UK law relating to exports?
The UK VAT law relating to the zero-rating of exports of goods for VAT purposes can be found in:
◾ Section 30(6) of the VAT Act 1994 for direct exports.
◾ Section 30(8) of the VAT Act 1994 and Regulation 129 of the VAT Regulations (Statutory Instrument 1995/2518) for indirect exports.
◾ Section 30(10) of the VAT Act 1994 for circumstances where the conditions for zero-rating are not met.
Additional legislation and Extra Statutory Concessions (ESCs) exist to allow relief from taxation in specific circumstances.
1.7 What is the legal status of this notice?
Under UK VAT law, HM Revenue & Customs (HMRC) may specify conditions to prevent evasion, avoidance or abuse. This notice lays down the conditions, which must be met in full, for goods exported outside the EC to be zero-rated. Plain English has been used wherever possible but as these conditions have legal status, some legal wording has been necessary.
Text shown in boxes has the force of law.
2.1 What is meant by VAT zero-rating?
A zero-rated VAT supply is one which is subject to VAT but where the VAT is at 0 per cent.
2.2 Why does zero-rating apply to exports?
VAT is a tax levied on goods and services consumed in the EC. When goods are exported they are 'consumed' outside the EC and to impose VAT on such goods would be contrary to the purpose of the tax. Therefore, the supply of exported goods is zero-rated provided certain conditions are met.
2.3 Who is the 'exporter' for VAT zero-rating purposes?
The exporter is the person who, for VAT purposes either:
◾ supplies or owns goods and exports or arranges for them to be exported to a destination outside the EC, or
◾ supplies goods to an overseas person, who arranges for the goods to be exported to a destination outside the EC.
Special rules exist if an export is preceded by multiple transactions (see paragraph 4.1).
2.4 What is meant by 'an overseas person'?
This means a person or company who is not resident in the UK or has no business establishment in the UK from which taxable supplies are made, or is an overseas authority.
2.5 Can I appoint someone to handle my export transactions?
Yes. You can appoint a freight forwarder, shipping company, airline or other person to handle export transactions and produce the necessary customs export declarations on your behalf. Information on customs procedures is contained in Notice 275 Customs: export procedures.
2.6 What are an agent’s obligations?
The freight forwarder, shipping company, airline or other person appointed by you, the exporter, or your overseas customer must:
◾ take reasonable steps to make sure that the goods are as described by the exporter
◾ make sure that the necessary pre- or post-shipment customs formalities are completed
◾ make sure that the goods are exported within the time limits specified by the exporter
◾ keep records of each export transaction
◾ obtain or provide valid evidence of export (see sections 6 and 7) and send it to the exporter once the goods have been exported.
2.10 What is meant by direct exports?
For VAT purposes a direct export occurs when you the supplier send goods to a destination outside the EC, and you are responsible either for arranging the transport yourself or appointing a freight agent. The goods may be exported by any of the following means:
◾ in your baggage
◾ in your own transport
◾ by rail, post or courier service, or
◾ by a shipping line, airline or freight forwarder employed by you and not by your customer.
3.Conditions and time limits for zero-rating
You must meet certain conditions before you can zero-rate supplies of goods for export. These conditions cover the:
◾ evidence (either official or commercial) you must hold to prove entitlement to zero-rating
◾ time limits in which the goods must be physically exported from the EC
◾ time limits in which you must obtain evidence of export to support zero-rating.
Only exports that comply with these conditions are eligible for zero-rating.
3.2 Why are conditions necessary?
The conditions set out in regulations and this notice are necessary to make sure only genuine exports are zero-rated whilst keeping VAT export procedures as simple as possible.
3.3 Conditions for zero-rating direct exports
The text in this box has the force of law
A supply of goods sent to a destination outside the EC is liable to the zero rate as a direct export where you:
◾ make sure that the goods are exported from the EC within the specified time limits (see paragraph 3.5)
◾ obtain official or commercial evidence of export as appropriate (see paragraphs 6.2 and 6.3) within the specified time limits
◾ keep supplementary evidence of the export transaction (see paragraph 6.4), and
◾ comply with the law and the conditions of this notice.
You must not zero-rate a direct export where you:
◾ deliver or post the goods to a customer’s address in the EC (including the UK), or
◾ allow the goods to be collected by or on behalf of your customer even if it is claimed they are for subsequent export. See paragraphs 3.6 and 7.4 for details of deliveries made to another UK trader for groupage, consolidation, processing or incorporation prior to export.
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