VAT on electronics within the EU

[.o:0|O|0:o.]

Hello,

I was wondering if anyone has had experience buying goods sold in the EU from the UK. My issue is with VAT on goods. I realise this falls under accounting, but it is also connected to electronics trading and I know there will be a smaller percentage of people who have some experience with this.

The first part concerns businesses and the final question might interest private individuals buying equipment or bulk materials and components from other EU countries.

This is what I know:

1) Each EU member is free to set it's own VAT rate provided it is not below 15% (some goods and services are reduced or exempt -- not applicable in this case).

2) VAT ensures that the government receive a percentage for each sale by passing the bill down to the end buyer through the supply chain (it removes the incentive for the widescale evasion, smuggling and fraud that would take place otherwise) ...Apparently Wilhelm von Siemens came up with the idea.

3) In the UK VAT is set to 17.5% and will rise to 20% from January 4th 2011 and in Ireland (where the goods are being sold) VAT is 21%

4) If I were to acquire, as a business, a taxable product from an Irish seller, the seller would pass their 21% VAT rate down to me (complying with Ireland's rules) and I would then claim it back as a VAT Registered natural person or entity. I would in turn pass on the to my immediate customers and pay the Irish government the difference. BUT, I cannot do this as I am not in selling in Ireland...

5) Once the goods leave Ireland, the Irish government get 21% from the purchase and the item is finalised as having left that country. The Irish seller is happy and the government is happy. Case closed and a round of Guinness, for them!

Now here comes the subtle part which is illuding me or I am not entirely sure about...

A) Once the item reaches HM Customs in the UK, am I expected to pay upon collection the local 17.5% VAT on the value after conversion from EUR into GBP, as though it had been sold and purchased in the UK (with the possibility of claiming it back)? It appears so.

B) If so, is it not the case that I end up passing down the 17.5% VAT to my British customer along with something hidden in the price to account for the Irish VAT that I am now stuck with?

C) Or, being in the EU, is there some agreement between states that ensures I am not "stuck with" two VATs (in order to encourage the free market)? (......How would they work out who gets what?)


For private buyers:

D) Ok, now a question as a private individual in the UK who wants to buy a product from the EU, say Ireland still. If I buy a piece of equipment for personal use, I am required to account for the VAT as the end consumer so that over there they can happily close their books... However, when the piece of equipment reaches the UK, HM Customs immediately want 17.5% of the value after conversion from EUR as though it just been bought in the UK. Does UK customs consider that I have already paid Irish VAT (rated higher) and waive the UK VAT? Or do I have to satisfy both the Irish government and the British government by paying (21+17.5)% VAT ?


Hope this is not too boring

Thanks in advance,
.o:0|O|0:o.

[mikeselectricstuff]

If you are a VAT registered business, you do not pay VAT to other EU suppliers - you give them your VAT no. and they supply VAT-free.

[Bored@Work]

First, as with everything made by politicians, there are heaps of special and illogical cases and variations. E.g. I remember special rules apply to the channel islands. Second, I am not an accounting / tax specialist, so treat the following with a grain of salt.

Private buyer, commercial seller, both within the EU:

Sales tax in the country of the seller. The commercial seller has to make sure he gets it as part of the payment from the buyer and has to make sure to forward it to his national authorities. And that's it.

Commercial buyer, commercial seller, both within the EU:

The seller should have a tax identification number which should permit him to ship within the EU without sales tax, if the buyer also has a tax identification number. National laws then dictate if / how each party has to report the transaction to the local tax authorities, e.g. every three month in a summary tax declaration, referencing the involved tax identification number. Tax that applies should be that of the buyer's country, buyer has to pay the tax to his national authority according to national regulations.

If the buyer doesn't have a tax identification number the seller is not permitted to ship to him tax-free. The seller needs to handle the buyer like a private buyer. The buyer can try to get a refund from the seller's national tax authorities and then to pay tax in his own country.

[alm]

About questions A-D, packages from within the EU don't normally have to go through customs (there may be exceptions), so you don't pay VAT twice, and the VAT is paid by the private buyer directly to the seller, just like local transactions.

I believe the seller may have to charge VAT at the rate of the buyer's country, not sure if the seller actually has to forward it to that country, or if their national tax authority handles that.

[PetrosA]

IIRC, as long as both countries are in EU, private buyers pay VAT of the seller's country and none at import (it doesn't go through customs, so no way to "import"). This works out well for people in countries with higher VAT rates like Poland (22%) when buying from lower VAT countries. I'm not sure whether someone buying from a country with a higher VAT rate would be able to get a refund when buying, I don't think so.

My wife worked in a company with sales in Poland (EU) and abroad. Commercial buyers would pay full price with VAT and if they were from non-EU countries, they get a Tax-Free document which entitles them to a refund of the VAT upon proof of export of goods, while customers from EU states would have to work the refunds out in their own countries. It sounds like you'll need to talk with an accountant who specializes in this in your country of business.

[.o:0|O|0:o.]

Thanks for all your answers. I agree that hiring an accountant would be the way to go at a later stage, but not as a way of making up for a lack of understanding. Besides, there is a certain ingenuity in how these tax systems work that I am interested in understanding for my own edification. I am still not entirely certain I will not be financially "taxedrated" upon making an EU order, so it will have to be a cautious one.

I do have a little more confidence, however, and I did stumble across the following link (which I missed the first time round), if anyone is still awake:

http://www.hmrc.gov.uk/vat/cross-border-changes-2010.htm

It details "Cross-border VAT changes" to take place from January 1st, 2011. It is aimed at business, but there is also a succinct answer to my question for private buyers.


Thanks again! 
.o:0|O|0:o.
 

[mikeselectricstuff]

You really don't need an accountant to do VAT - it's really pretty simple. I'm sure he HMRC website has some guides - you'll find that the majority of these will be sections on special-cases you don't need to worry about, e.g. there are some complications with a few specific commodities that have historically been used for fraud, where they've changed the system to make it harder.

[PetrosA]

I'm not saying that anyone needs to hire an accountant to do their VAT. I only recommended consulting with one (or two or three). I ran a business in Poland for 10 years and lost it in large part because of bad accounting regarding VAT calculations. Anything that can influence your numbers at the high levels that VAT does need to be scrutinized very carefully since a stupid mistake can cost you thousands in a very short time if you have any meaningful turnover. In my case, I was paying 22% VAT on all my coffee drinks when in reality, any drink that contained more than 50% milk was a 7% VAT item (special VAT rate for support of PL agriculture). Since most of my espresso coffees were mostly milk (and these were my main sellers), this meant at least EU 1000 per month that I was overpaying. After 5 years, that's a hell of a lot of money.

I understand that my situation was different in that it didn't have anything to do with import/export, but getting solid answers from an expert certainly isn't going to hurt anyone. Finding out that you owe 30,000 in VAT just might