Imports leave trader in a VAT muddle
DB writes: I run an export/import business and supply a German customer with goods that are delivered direct from Holland to Germany. Am I correct in not accounting for UK Vat on the invoice I raise to the German client, as I understand that he pays German Vat on my invoice when clearing the goods from the German port? On occasions we assist our German customer by importing and clearing goods that are delivered directly to a British customer of the German company. Please advise on which figure I should enter on my Vat return. Is it the amount I charge to the German company or the amount the German company charges its UK customer?
In the first scenario, there is a supply by an Dutch company to a UK company, which then supplies a German company - though the goods are delivered directly from the Dutch company to the German one. If you obtain title to the goods in Germany, you can do the following. Instead of being required to register for Vat in Germany and account for German Vat, the EU simplification directive allows you to treat your acquisition as if it has arisen in the country of destination - Germany, in other words. Your acquisition is exempted from Vat provided that the acquisition enables a subsequent supply to take place in that country and your German customer has been designated as liable for the Vat due there. You must: Show the supply on your EU sales list, quoting the German Vat number of your customer, and identify it as a triangular transaction by entering the figure ´2´ in the indicator box. Triangular transactions, should not be shown on your Vat return in Box 8, nor on your supplementary declaration (SSD); Issue a Vat invoice with the following endorsement - Vat: EC Article 28 Simplification Invoice. In the second scenario you will have to pay import duty and Vat when you bring the goods into Britain because you are importing them from Holland. The duty will then be a non-recoverable cost but the import Vat can be recovered by entering it on your Vat return as input tax. You will then sell the goods to the German company and charge UK Vat on the sale, and this Vat will be included on your UK Vat return. The German company has acquired goods in Britain and if it registers here it will be able to recover the UK Vat that you charge it.