Tax and VAT issues when trading with countries in the European Union

If you’re trading with countries in the European Union there are some rules and procedures
you’ll need to be aware of. Trading with other EU countries could open up a huge marketplace
for your business, giving you access to a wide range of suppliers and customers. The
single market for goods and services was set up to make it easier for businesses throughout
the EU to trade with each other. Goods can move around freely with no customs duties
and without too much red tape. But there are some VAT rules to follow. And there may be
duties to pay on certain goods. OK, so how does VAT work if you trade in the EU? Well,
if you buy goods for your business from another EU country, you’ll normally pay VAT on them.
If you’re not VAT registered, you’ll usually pay VAT at the rate that’s charged in your
supplier’s country. If you are VAT registered, you’ll usually account for the same amount
of VAT that you’d have paid if you’d bought the goods back in the UK. You’ll normally
be able to claim the VAT back. What about selling goods to other EU countries? Well,
if you’re VAT registered and you sell goods to another VAT-registered business, you normally
‘zero rate’ them, meaning you add no VAT to the price. But you’ll need your customer’s
VAT number to do this. You’ll also have to keep evidence to show that the goods have
left the UK. You’ll also have to tell HMRC about these sales by completing an EC Sales
List. And if your sales to EU countries are worth more than a certain amount, you’ll need
to provide information for national trade statistics too. If you’re VAT registered but
your customer isn’t, you charge VAT at the normal UK rate. And if you’re not VAT registered,
there’s no VAT. This is subject to a limit – the distance selling threshold – in the
customer’s member state. There are other rules that may apply if you trade in certain types
of goods. For example, if you bring alcohol, tobacco or energy products into the UK, you’ll
normally need to pay excise duty. And if you trade in certain items, you may need a licence or a certificate. And for food, you will need to consider licences, permissions and
quotas. The VAT rules for services are different to those for goods, and depend on whether
you’re selling to businesses or consumers. So, if you trade with other EU countries,
there are procedures for dealing with VAT. These apply to both goods and services. Certain
goods are also covered by excise duty or export licensing rules, and you may need to complete
a declaration for statistical purposes.

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