Paying VAT on delivery costs?

blobert

Hello.

Supposing I sell an item for €20 and charge €2.50 postage.

Am I expected to pay VAT on just the sale price or on on the full €22.50?

Also, if you only have to pay VAT on the sale price what would happen if you factored free delivery into the cost? Would you have to then pay VAT on the total amount.

Thanks in advance.

Culchie

blobert wrote: »

Hello.

Supposing I sell an item for €20 and charge €2.50 postage.

Am I expected to pay VAT on just the sale price or on on the full €22.50?

Also, if you only have to pay VAT on the sale price what would happen if you factored free delivery into the cost? Would you have to then pay VAT on the total amount.

Thanks in advance.

You charge and pay VAT on goods and delivery

blobert

Thanks, I had some vague notion that there was no VAT on An Post regular postage?

Culchie

blobert wrote: »

Thanks, I had some vague notion that there was no VAT on An Post regular postage?

I'm open to correction, but if you are VAT registered, and invoicing customer for postage/carraige costs then you charge VAT.

It will be a VAT neutral transaction.

RUDOLF289

blobert wrote: »

Thanks, I had some vague notion that there was no VAT on An Post regular postage?

Hello Blobert,

according to the VAT Guide 2008

"public postal services (including the supply of goods and services incidental thereto) supplied by An Post including postmasters, or by persons licensed in accordance with section 73 or subsection (1) of section 111 of the Postal and Telecommunications Services Act, 1983"; are exempt from VAT.

Therefore in my opinion if you show the postage as a separate item on your invoice, you should not calculate VAT on the postage. However, if you do not show the VAT separate then you are charging your clients 21.5% VAT over the value you charge.

Now, if you use a courier service, you will get an invoice from the courier company that shows VAT. That VAT is a deductible input which you can claim back through your VAT return. You will need to charge VAT over the delivery cost you charge your client.

Hope this clarifies

Regards,
Rudolf289

blobert

Thanks for the replies, still having trouble getting my head around it.

So if I charge my customer €15 for my product and €3 for An Post postage which is a separate item on the invoice, I charge VAT only on the €15 and pay this to Revenue?

Assuming the courier charges €5 (ex VAT) for delivery. Do I have to charge my customer €5 + VAT and then pay this VAT to Revenue?

Thanks

RUDOLF289

blobert wrote: »

Thanks for the replies, still having trouble getting my head around it.

So if I charge my customer €15 for my product and €3 for An Post postage which is a separate item on the invoice, I charge VAT only on the €15 and pay this to Revenue?

Assuming the courier charges €5 (ex VAT) for delivery. Do I have to charge my customer €5 + VAT and then pay this VAT to Revenue?

Thanks

Hello Blobert,

You are correct. Just be aware that the VAT you pay to the courier is a "deductible input", i.e. in your VAT return where you account for the VAT you charge on sales, you claim back the VAT you pay on the delivery costs.

I recently posted the VAT guide ; http://www.boards.ie/vbulletin/showthread.php?t=2055672165

Have a look at that and let me know if you have any questions

Regards,
RUDOLF289

mad_ferrit

Hi there,

I have read this thread, but am a little confused about something. I am hoping one of you friendly, knowledgeable people can help me.

I am just starting a new company importing goods from China for distribution here in the UK and Ireland, and I want to advertise my products as "Inclusive of VAT and Free Delivery".

Assuming I do so, could someone explain my VAT liability in the following example...

1 - I sell product X to a customer for £100 inc. VAT, Free Delivery.
2 - The 'hidden' VAT is a touch over £13.00 (let's call it £13.00 for simplicity)
3 - I can't claim any input VAT back as I didn't pay any in the first place, so I am immediately £13.00 down (?)
4 - I pay £10 + VAT for delivery (£11.50)
5 - Can I claim back the £1.50 even though I have advertised my goods as inclusive of VAT and delivery? Or do I need to be completely transparent in my costs and VAT on the checkout page?

I am a little confused, so if anyone can offer any other advice for me given this situation I'd be very grateful.

Thanks in advance.

dbran

RUDOLF289 wrote: »

Hello Blobert,

according to the VAT Guide 2008

"public postal services (including the supply of goods and services incidental thereto) supplied by An Post including postmasters, or by persons licensed in accordance with section 73 or subsection (1) of section 111 of the Postal and Telecommunications Services Act, 1983"; are exempt from VAT.

Therefore in my opinion if you show the postage as a separate item on your invoice, you should not calculate VAT on the postage. However, if you do not show the VAT separate then you are charging your clients 21.5% VAT over the value you charge.

Now, if you use a courier service, you will get an invoice from the courier company that shows VAT. That VAT is a deductible input which you can claim back through your VAT return. You will need to charge VAT over the delivery cost you charge your client.

Hope this clarifies

Regards,
Rudolf289

Sorry but i do not think you are right here. This section of the VAT act would only apply to An Post.

The OP is not An post so I believe you do charge VAT on the whole amount.

Regards

dbran

mad_ferrit

Please don't neglect my post...

DubTony

dbran wrote: »

Sorry but i do not think you are right here. This section of the VAT act would only apply to An Post.

The OP is not An post so I believe you do charge VAT on the whole amount.

Regards

dbran

from Rudolf post
""public postal services .... are exempt from VAT.

If you go to the post office and post the goods via any kind of postal service or if the postman picks the stuff up from your office, there is no VAT charge. THERE IS NO VAT ON POST.

RUDOLF289

Hello mad_ferrit

Just need to clarify a few things ;

1) you import product from China ? Surely you pay VAT at the point of entry ? If you do (and there is no way you would import product without paying VAT) then that is a deductible input in your VAT return.
2) The VAT you pay to the courier company is a deductible input aswell, so you claim that again as a deductible input in your VAT return.
3) On your sales of Euro 100.00 inclusive of VAT. Not knowing the product you are selling, I reckon you should calculate 21.5% as there are not many products I know that attract a 13.5% VAT rate. Assuming the correct rate is 21.5% you owe the revenue Euro 17.69548 (apologies for the figures after the decimal point) for each item you sell.

So let's say - for the sake of argument - that your landed cost including cost of the product, freight from China to Ireland and duty (if applicable) comes to Euro 30.00. That means that at time of importation you will pay 21.5% over Euro 30.00= Euro 6.45. You pay the carrier Euro 1.50 in VAT. That means that for every item you ship to your client(s) you have a deductible input of Euro 7.95 versus the amount you owe in VAT on sales of Euro 17.69548.

Now, the point is, unless you expect to sell more than 1 Million Euro of product in a 12 month period, you can apply to only remit VAT on the basis of cash received, i.e. when your client pays you. That is likely to mean that with the VAT you pay on imports you are getting a refund in your first VAT return.

By the way, if your delivery cost of Euro 10.00 plus VAT is a real cost, perhaps we should have a chat as I think there is money to be saved. Also, would be happy to give you a second opinion on anything from Transportation from China to Ireland to Customs classification.

Feel free to contact me if you have any further questions

Best regards,
RUDOLF289

RUDOLF289

dbran,

I can not claim to be an authority in relation to VAT on domestic services (my experience and expertise is more in the international arena), so like yourself, I am open to correction on this.

However, if you post something, you do not pay VAT. Now, in my view the point is, do you charge an "all in" price or do you show the postage as a separate item. If you charge an all in price without breakdown, you charge VAT on the total price. If you show postage as a separate item - and you indeed use An Post to deliver the product - you are not required to charge VAT on the postage element of your invoice.

I would expect that the Revenue Commissioners / VAT office would be able to answer the question more definitively but I am reasonably sure of my ground here.

dbran wrote: »

Sorry but i do not think you are right here. This section of the VAT act would only apply to An Post.

The OP is not An post so I believe you do charge VAT on the whole amount.

Regards

dbran

DubTony

.

mad_ferrit wrote: »

Hi there,

I have read this thread, but am a little confused about something. I am hoping one of you friendly, knowledgeable people can help me.

I am just starting a new company importing goods from China for distribution here in the UK and Ireland, and I want to advertise my products as "Inclusive of VAT and Free Delivery".

If you offer free delivery there is no vat liability to you. You can't charge VAT on something you don't sell, and in this case you're not selling the delivery service. So you charge VAT on the goods and price delivery on the invoice as €0.00 (so no VAT on delivery)


Assuming I do so, could someone explain my VAT liability in the following example...

1 - I sell product X to a customer for £100 inc. VAT, Free Delivery.
2 - The 'hidden' VAT is a touch over £13.00 (let's call it £13.00 for simplicity)
I think you're vat rate is kinda wierd.

€100/1.215=€82.30
€100/1.135=€88.10


3 - I can't claim any input VAT back as I didn't pay any in the first place, so I am immediately £13.00 down (?)

If you are VAT registered and buy goods from another EU country you won't pay any vat to your supplier. If you purchase goods from outside the EU you will pay the VAT to customs. This can later be reclaimed.

Remember, your selling price is not actually €100, it's €82.30 + 21.5% VAT for a retail total of €100. However, when selling to non-registered end users you don't generally let them know about the VAT as it's a hidden tax and legally is required to be included in all retail prices.

4 - I pay £10 + VAT for delivery (£11.50)

5 - Can I claim back the £1.50 even though I have advertised my goods as inclusive of VAT and delivery? Or do I need to be completely transparent in my costs and VAT on the checkout page?
Another wierd VAT rate. Oh! It just occured to me that you might be in the UK. Yes, you can claim back ALL VAT charged to you by suppliers. What you claim back has nothing to do with how you charge for goods going out. So if you decided to give away everything for nothing, and free delivery into the bargain, you would charge absolutely no VAT and you would reclaim all VAT you paid to suppliers.


I am a little confused, so if anyone can offer any other advice for me given this situation I'd be very grateful.

Thanks in advance.

mad_ferrit

Thanks ever so much for your replies

And yes, I am in the UK, and I have just realised that this is an Irish website.

I am so sorry, I am a complete numpty! I sincerely hope I haven't wasted too much of your time

I have still found your replies, Rudolf and DubTony, extremely useful!

Apologies once again!

DubTony

No problem. The rules are the same. Welcome to boards. Stick around. Just because we're not in the UK doesn't mean we can't be helpful, or indeed your knowledge wouldn't be helpful around here as well.

mad_ferrit

Brilliant! Thanks again, you've really cleared that up for me

hello1

Can anyone confirm this. i am going to be in a similar position to the one below. Using an Post to deliver and passing on the cost. If i show the postage cost seperatlyon the invoice, will i have to charge vat. I cant see what i should be out of pocket the vat amount.

RUDOLF289 wrote: »

dbran,

I can not claim to be an authority in relation to VAT on domestic services (my experience and expertise is more in the international arena), so like yourself, I am open to correction on this.

However, if you post something, you do not pay VAT. Now, in my view the point is, do you charge an "all in" price or do you show the postage as a separate item. If you charge an all in price without breakdown, you charge VAT on the total price. If you show postage as a separate item - and you indeed use An Post to deliver the product - you are not required to charge VAT on the postage element of your invoice.

I would expect that the Revenue Commissioners / VAT office would be able to answer the question more definitively but I am reasonably sure of my ground here.

91011

hello1 wrote: »

Can anyone confirm this. i am going to be in a similar position to the one below. Using an Post to deliver and passing on the cost. If i show the postage cost seperatlyon the invoice, will i have to charge vat. I cant see what i should be out of pocket the vat amount.

quick answer = no.

Example

you sell the item for €10 + vat + delivery. Delivery is by an post.

Invoice is €10 + €2.10 vat + postage cost.

On the vat return the postage charge is entered as non vatable income.

blobert

Hi guys,

I just wanted to come back to this.

Suppose I deliver my products by An Post which when invoiced separately from the main item would be VAT free.

What if I want to offer a standard delivery charge of €2 to send via An Post for 1-3 items. Lets say 1 item costs €1.35 to post, 2 items €1.90 and 3 cost €2.60. Is it ok for me to charge this standard delivery charge of €2 and not pay VAT on it or must I charge the exact amount the postage is costing me?

I ask this as I got a cheap game delivered today from Gamestop that cost €1 with a €2 delivery charge. On the invoice, there was a VAT breakdown for the €1 cost of the game but not for the delivery charge. The item only cost €1.35 to post (marked on envelope) but as I say the delivery charge was €2. I assume this company is not breaking the rules so I'm guessing it is possible?

If you have any idea what the rule is with this please let me know. I'm waiting to hear back from Revenue on it but I'd appreciate any other opinions.

dbran

Hi

Directly from the VAT guide Page 74;

9.11 Postage and insurance - reimbursement
Where amounts are charged separately for postage and insurance and paid over in their entirety to An
Post or to the insurer on behalf of customers, suppliers may treat such charges as not being subject to
VAT. If, for example, a trader charges an extra c5 for posting an order and such amount of postage is
actually paid over to An Post, the c5 may be treated as exempt. Similarly, if a car hire company charges
c50 for motor insurance and that amount is actually paid over in full to insurers the c50 is treated as
exempt.However, if a charge is made for posting and/or insurance, and a lesser amount is paid over by
the supplier to An Post or to the relevant insurance company, the charge made to the customer is
regarded as part of the total price of the goods/service supplied, and is subject to the VAT rate applicable
to the goods/service in question.

So if you charge the actual amount that it costs to post, and you pay over exactly this amount to an post and you put it as a line on the invoice then it is exempt. If you charge a standard rate and it is not the amount that you actually pay to an post then it is taxable.

Hope this helps

RUDOLF289

dbran wrote: »

Hi

Directly from the VAT guide Page 74;

9.11 Postage and insurance - reimbursement
Where amounts are charged separately for postage and insurance and paid over in their entirety to An
Post or to the insurer on behalf of customers, suppliers may treat such charges as not being subject to
VAT. If, for example, a trader charges an extra c5 for posting an order and such amount of postage is
actually paid over to An Post, the c5 may be treated as exempt. Similarly, if a car hire company charges
c50 for motor insurance and that amount is actually paid over in full to insurers the c50 is treated as
exempt.However, if a charge is made for posting and/or insurance, and a lesser amount is paid over by
the supplier to An Post or to the relevant insurance company, the charge made to the customer is
regarded as part of the total price of the goods/service supplied, and is subject to the VAT rate applicable
to the goods/service in question.

So if you charge the actual amount that it costs to post, and you pay over exactly this amount to an post and you put it as a line on the invoice then it is exempt. If you charge a standard rate and it is not the amount that you actually pay to an post then it is taxable.

Hope this helps

Concurr !

blobert

dbran wrote: »

Hi

Directly from the VAT guide Page 74;

9.11 Postage and insurance - reimbursement
Where amounts are charged separately for postage and insurance and paid over in their entirety to An
Post or to the insurer on behalf of customers, suppliers may treat such charges as not being subject to
VAT. If, for example, a trader charges an extra c5 for posting an order and such amount of postage is
actually paid over to An Post, the c5 may be treated as exempt. Similarly, if a car hire company charges
c50 for motor insurance and that amount is actually paid over in full to insurers the c50 is treated as
exempt.However, if a charge is made for posting and/or insurance, and a lesser amount is paid over by
the supplier to An Post or to the relevant insurance company, the charge made to the customer is
regarded as part of the total price of the goods/service supplied, and is subject to the VAT rate applicable
to the goods/service in question.

So if you charge the actual amount that it costs to post, and you pay over exactly this amount to an post and you put it as a line on the invoice then it is exempt. If you charge a standard rate and it is not the amount that you actually pay to an post then it is taxable.

Hope this helps

Thanks very much for the quick reply, I appreciate it.

One other quick question, slightly more complicated.

For sending post to the UK, it is cheaper to send it up north to a company there and have them send it by Royal Mail. Royal mail is VAT exempt as well I believe but what of the cost of sending the mail up there by courier and the surcharge the company put on posting it? Is it acceptable to work this out and charge whatever this costs per delivery without VAT? It's a bit of a tricky one as it involves a combination of VAT exempt and non VAT exempt services.

Let me know what you think.

Thanks again for the advice, it's much appreciated.

suey71

Also, would it be possible to charge the customer, say €5?

€4.12 plus €0.88c in VAT, and just tell the customer that you'll deliver it for a flat rate of €5.

They're getting the item posted for €5 and they're covering the cost of VAT.

The Guvnor

Both An Post and Royal Mail incl: their parcel sections - parcelforce and what was sds charge no vat on the services they offer.

Any other courier or mail delivery will charge you VAT at the prevailing rate.

blobert

blobert wrote: »

Thanks very much for the quick reply, I appreciate it.

One other quick question, slightly more complicated.

For sending post to the UK, it is cheaper to send it up north to a company there and have them send it by Royal Mail. Royal mail is VAT exempt as well I believe but what of the cost of sending the mail up there by courier and the surcharge the company put on posting it? Is it acceptable to work this out and charge whatever this costs per delivery without VAT? It's a bit of a tricky one as it involves a combination of VAT exempt and non VAT exempt services.

Let me know what you think.

Thanks again for the advice, it's much appreciated.

If anyone has any advice on this I'd appreciate it.

blobert

blobert wrote: »

Thanks very much for the quick reply, I appreciate it.

One other quick question, slightly more complicated.

For sending post to the UK, it is cheaper to send it up north to a company there and have them send it by Royal Mail. Royal mail is VAT exempt as well I believe but what of the cost of sending the mail up there by courier and the surcharge the company put on posting it? Is it acceptable to work this out and charge whatever this costs per delivery without VAT? It's a bit of a tricky one as it involves a combination of VAT exempt and non VAT exempt services.

Let me know what you think.

Thanks again for the advice, it's much appreciated.

I got a reply back from the VAT department in Revenue saying "Unfortunately I cannot answer your enquiry as regards the Royal Mail and the UK Revenue Service."

Any idea where I can go next to try and get info on this, I would have thought they would know in Revenue?

Thanks

ana_conda

I know this is an old thread but if i'm going mad and it seem the best place to vent and get some advice.

I purchased a second hand camera bag on ebay vauled at $80 with an additional charge of $50 for UPS delivery total $130. This morning I have to pay UPS tax charges of 40 euro!

They want vat for the value of $130 item plus shipping and UPS are also charging me an additional 20 euro for paying the vat on my behalf which I of course have to pay aswell.

So for a second hand item from america I'm paying 180 dollors when it actually cost is 80 dollors. Totally shafted and UPS are a joke 50 dollors delivery and 20 euor for this bull extra made up charge. Also should the company have marked the value of the item as 80 dollors and not included 50 dollors for the shipping?

TylerIE

ana_conda wrote: »

I know this is an old thread but if i'm going mad and it seem the best place to vent and get some advice.

I purchased a second hand camera bag on ebay vauled at $80 with an additional charge of $50 for UPS delivery total $130. This morning I have to pay UPS tax charges of 40 euro!

They want vat for the value of $130 item plus shipping and UPS are also charging me an additional 20 euro for paying the vat on my behalf which I of course have to pay aswell.

So for a second hand item from america I'm paying 180 dollors when it actually cost is 80 dollors. Totally shafted and UPS are a joke 50 dollors delivery and 20 euor for this bull extra made up charge. Also should the company have marked the value of the item as 80 dollors and not included 50 dollors for the shipping?

Its not really UPS its Customs.

Customs charge VAT on the total cost if items coming into the country - so in this case its the purchase price + the shipping = total, then VAT on that.

Other couriers charge the same - some even do purchase price + the shipping + their processing fee (€10 / 6 items per package) = total and the whole lot has VAT added.

As regards UPS at 50 dollars for delivery thats quite good for an international courier - it may be advisable to try get your ebay sellers to send via a USPS tracked service in future if its just one item at a time.

UPS at the moment are quoting cheaper than FedEx or DHL for US to IE - for years FedEx were by far the least expensive.

ana_conda

Hi TylerIE

I understand the vat charge and I understand why I have to pay it. But UPS has charged another 20 euro on top of the VAT charge of 23 euro. They said it a charge for paying the VAT on my behalf. So I had to pay 23 euro in VAT and 20 to UPS for paying the VAT charge.

Also I don't think you should have to pay VAT on the delivery? I have no problem paying the VAT on the actual item but VAT on the postage that doesn't seem right. Especially because UPS are in Ireland. If i was having something posted by An-Post the VAT is built into the cost so why pay VAT on postage with UPC?

Anyway I can live with the VAT even if it's VAT on the shipping as well and the product. But what I think is outrageous it the extra 20 euro UPS expect me to pay them for initially paying the VAT on my behalf. I never heard of such a thing. Beward of these hidden cost when using UPC for imports!

TylerIE

ana_conda wrote: »

Hi TylerIE

I understand the vat charge and I understand why I have to pay it. But UPS has charged another 20 euro on top of the VAT charge of 23 euro. They said it a charge for paying the VAT on my behalf. So I had to pay 23 euro in VAT and 20 to UPS for paying the VAT charge.

Also I don't think you should have to pay VAT on the delivery? I have no problem paying the VAT on the actual item but VAT on the postage that doesn't seem right. Especially because UPS are in Ireland. If i was having something posted by An-Post the VAT is built into the cost so why pay VAT on postage with UPC?

Anyway I can live with the VAT even if it's VAT on the shipping as well and the product. But what I think is outrageous it the extra 20 euro UPS expect me to pay them for initially paying the VAT on my behalf. I never heard of such a thing. Beward of these hidden cost when using UPC for imports!

While I initially strongly disliked paying VAT on the shipping inwards I can understand the rationale - if you buy something in the shop etc you are paying a price that includes all of shipping from manufacture forward, including VAT but its just not seperately listed.

Re the e20 fee for UPS processing, I too find it extraordinarily high for the service provided, but as I said FedEx charge something similar so they are not alone - it seems to be standard fare when importing goods of any value by any courier.

ana_conda

I feel pretty stung!