Dropshipping and VAT

TomMc

Query: Can I as a VAT registered trader in Ireland accept payment from a non-vat person (Joe public) in the UK for goods and not charge 21% VAT extra as well. Ordinarily you would have to charge 21pc vat or zero rate if they were VAT registered as well, and you were shipping goods from Ireland to the UK or within the EU. I'm well below thresholds for trading in other European countries and having to register for vat locally as well.

But the difference in my example is that the goods are physically located outside the EU. So client pays me, I pay the provider in the USA and they ship the goods directly from the USA to the UK by post.

Now when the goods ($500 worth) actually arrive inside the EU customs will levy the relevant import duties and vat to the customer locally and collect payment via the post office/postman. So if I charge my client VAT as well, they will get hit on the double. On the otherhand if I don't they could also escape via free parcel post entirely. I called the revenue and the whole thing is somewhat alien to them. When they came back to me, I got the impression they were trying to fob me off. Basically they said that the onus is on me to ensure vat is paid, but couldn't advise what to do if client was charged on the double. There has to be some EU law, that spells it out in black and white, without any ambiguity.

If anyone can shed some light on the above it would be greatly appreciated.

ssbob

TomMc wrote: »

Query: Can I as a VAT registered trader in Ireland accept payment from a non-vat person (Joe public) in the UK for goods and not charge 21% VAT extra as well. Ordinarily you would have to charge 21pc vat or zero rate if they were VAT registered as well, and you were shipping goods from Ireland to the UK or within the EU. I'm well below thresholds for trading in other European countries and having to register for vat locally as well.

But the difference in my example is that the goods are physically located outside the EU. So client pays me, I pay the provider in the USA and they ship the goods directly from the USA to the UK by post.

Now when the goods ($500 worth) actually arrive inside the EU customs will levy the relevant import duties and vat to the customer locally and collect payment via the post office/postman. So if I charge my client VAT as well, they will get hit on the double. On the otherhand if I don't they could also escape via free parcel post entirely. I called the revenue and the whole thing is somewhat alien to them. When they came back to me, I got the impression they were trying to fob me off. Basically they said that the onus is on me to ensure vat is paid, but couldn't advise what to do if client was charged on the double. There has to be some EU law, that spells it out in black and white, without any ambiguity.

If anyone can shed some light on the above it would be greatly appreciated.

Hi TomMc,

I was of the opinion that even though you are using Dropshipping, in the eyes of the revenue, you will be buying the goods from the US, they will be held in your inventory(which is in Ireland) until the sale happens(immediately) and you will then sell onto UK customer therefore you will have to charge them VAT. As long as they have a receipt from you showing the VAT they paid then I am sure they will be able to claim back any customs duty which had to be paid up to the VAT amount they have already paid to you.

It is quite complicated so I would suggest you ring customs about it and also your accountant.

Hope this helps.

Bob

TomMc

Thanks Bob. It's a case where the buyer wouldn't be bothered to try and reclaim a relatively small amount. Where would they they start, what forms, how long does it take (rhetorical questions). For the time, effort and hassle involved it wouldn't be worth their while. And of course paying similar taxes in two different countries would only complicate things further. Customs it is so.

Mr. Incognito

In effect you are distance selling into the UK.

As a result you will be oblidged to register in the UK not Ireland and pay VAT there on any sales.

If the customer is paying import tax this is not the same as VAT. You will still have to charge UK VAT on the amount you are billing the UK customer.

TomMc

AFAIK, you have to reach a certain threshold figure (70K) before been obliged to register for VAT in the UK. It varies from country to country. Even if registered it still wouldn't rectify the VAT situation.