25 Nov

Tax implications when selling abroad

When setting up a business, it may make good sense to offer your goods and services overseas. After all, the whole world’s a marketplace - why not take advantage of it?

But what are the tax implications of doing so? It’ll probably come as no surprise that there are a whole bunch of different rules, depending on the type of service you offer, and where in the world you offer it. Let’s look a little closer.

VAT registration for selling overseas

If you’re selling anything abroad, you’ll need to be VAT registered for trading overseas. You can read more about whether you should register your business for VAT here.

Not only that, but it’s a good idea to brush up on the sales tax rules for the country you’ll be selling to. For most countries, there’ll be some tax applied to any products you wish to sell its companies or residents.

The rules are slightly different depending on whether you’re exporting within the EU, outside the EU, or selling digital services such as downloads. Don’t worry - we’ll come to each in turn.

Exporting within the EU*

The current rule is that, if you’re selling to non-business customers within the EU, you add VAT to your sales in the same way you would for UK customers. This is called distance selling.

This is how it works in practice. Most goods are exported by courier or freight forwarder. They’ll require a proforma invoice. Be sure to add the VAT, and add the invoice to your delivery.

For some restricted goods - such as live goods, meds, works of art or diamonds (you baller, you!) - you may need to acquire a special licence. There’s a full list of restricted goods here on the GOV.UK website. If you need one, you should attach a copy of your licence onto the consignment along with the proforma.

Exporting outside the EU

As a general rule for VAT, you can zero rate goods or services you’re selling to private customers or businesses outside of the EU.

It’s important to follow the tax rules for the country you’re selling to though. You may need to register for that country’s VAT equivalent, for instance. Be sure to pay any tax or duty you owe in the destination country.

You’ve got a lot more bits and bobs to slap on your consignment this time though. Here goes… You’ll need:

  • An EORI number. This only takes five minutes to apply for, and you may get it instantly. The longest you’ll have to wait is five working days.
  • A commodity code for the type of good you’re exporting.
  • A commercial invoice. List the goods at the price you’re selling them for, and include any freight or export insurance included in the grand total separately.
  • A licence for restricted goods, if you need one (see above).

All these need to be supplied to your freight forwarder or courier. Don’t forget to say thanks!

Also, be sure to keep hold of all documents involved. Proof of export could save you from being stung for VAT after the fact. Plus you need to retain commercial invoices and customs docs for six years.

Selling digital services in the EU

Are you selling a digital service such as video on demand, or downloads such as music, apps, games or ebooks? Then you’ll have to jump through a few hoops if your sales go over a £8,818 (before VAT) in a calendar year.

In this instance, you’ll have to register in each country where you’re supplying a service, and sign up for the VAT Mini One Stop Shop scheme. And you’ll have to do this even if you’re otherwise below the VAT threshold.

Top tip for selling abroad - know the lingo!

In more general terms, when selling abroad, the key is to identify your market and speak in their language. It’s all very well to have a great product or service, but if your marketing isn’t right, it’s likely to fall on deaf ears.

This is why we recommend using a translation service such as Brightlines, who’ll take extra care to ensure that your copy and messaging are localised to the market you’re targeting.

Does any of this bamboozle you?

We’re not surprised if it does - there are a lot of i’s to dot and t’s to cross. And if you’re thinking of branching out abroad, it really pays to be on top of your taxes and paperwork.

Well, as luck would have it, we’re here to help! Using an accountancy service such as Mazuma could save you time, money and tons of effort. To find out how we can help with your overseas venture, please feel free to contact us with no obligation.


*Please note that at the time of writing, the UK has yet to leave the EU, and rules affecting exports may be subject to change. 

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