International VAT ServicesRegistration, Returns & Refunds

It is easier than ever for companies to do business globally. That's why it's never been more important to make sure you understand International VAT.

Understanding International VAT issues

Today’s technology has connected us to the world, and it is increasingly likely that a business with an internet presence will attract clients from outside the UK. This is good news from a business perspective but presents the challenge of understanding the complex VAT rules relating to international services.

VAT on international services is one of the most complex areas of VAT, but our specialist VAT advisory team have a wealth of experience in this area and can help guide businesses through the VAT rules and regulations governing international business transactions.

Whatever your VAT query involves, get in touch with our team of specialists today. Where necessary, we can support our clients with international advice through our Praxity Global Alliance colleagues.

 

Which VAT jurisdiction is your service covered by?

The starting point for identifying the VAT treatment of international services is the ‘Place of Supply of Services’ rules which must be used to establish whether services are subject to UK VAT or fall within the VAT jurisdiction of another country.

The rules require you to consider the following:

  • Where is your customer?
  • Is your customer a business customer or an individual (non-business customer)?
  • What type of services are you providing?

 

Are you making B2B or B2C sales?

Although there are exceptions, most supplies of services are covered by the general rule which states that where you are suppling services to a business customer (B2B) the place of supply is where the customer belongs, whilst the place of supply to a non-business customer (B2C) is where the supplier belongs.

Following the general rule, a UK business charges UK VAT on services provided to non-business customers (B2C), but UK VAT is not charged on services supplied to business customers (B2B) as these are outside the scope of UK VAT.

Exceptions to the general rule include:

  • Services directly related to land
  • Services relating to cultural, artistic, sporting, scientific, entertainment, and educational activities
  • Restaurant and catering services
  • Work carried out on goods

These services are deemed to be supplied where performed regardless of where the customer is based.

B2C supplies of a professional, technical, financial, or intellectual nature are another exception to the general rule. They are outside the scope of UK VAT when the customer resides outside the UK.

 

Understanding the Use & Enjoyment Rule

Some services are covered by the ‘use and enjoyment’ rule. This ensures that VAT is charged based on where services are consumed rather than where the customer is located. The services covered by these rules are:

  • the hire of goods
  • electronically supplied services (B2B only)
  • telecommunications services (B2B only)
  • repairs to goods under an insurance claim (B2B only)
  • radio and television broadcasting services

Where any of these services are ‘used and enjoyed’ by a customer in an EU member state, there may be a liability to register for VAT in that member state.

Learn more about use and enjoyment in the UK and EU in our blog.

 

EU VAT Registration

B2C supplies of electronic services, including supplies of music, films and games, website hosting, software and software updates, and supplies of advertising space on websites are an exception to the general rule.

The place of supply is where the customer is located, and local VAT is chargeable if the customer resides in an EU member state. Options for charging and declaring EU VAT are:

  • registration for the Non-Union VAT MOSS scheme in an EU member state
  • registration for VAT in each EU member state where digital services are supplied to non-business customers.

 

Reverse charge

Receiving a supply of services from outside the UK has VAT implications for the UK purchaser.

A UK VAT registered business purchasing services from an overseas supplier will not be charged VAT. However, UK VAT must be accounted for on the VAT return of the UK business under the reverse charge mechanism.  A common and often overlooked example of this is software licenced from companies based in Ireland or the US.

There are numerous complexities and potential pitfalls associated with international VAT, and mistakes can be costly, both in time and money. This is why we believe it is essential that businesses seek qualified VAT guidance from those with experience in this complex and ever-evolving area of tax.

Read more: VAT Reverse Charge

 

OSS & IOSS: Selling online to EU customers

UK businesses will need to consider signing up to the OSS if they make sales to consumers of either goods from within the EU or Northern Ireland. The IOSS can be used to report and account for non-UK VAT on online sales of goods from outside the EU to consumers within the EU. For a full guide on OSS and IOSS, we invite you to read our detailed blog.

If you have a query relating to International VAT that is not answered here - please contact us using the form below.

International VAT FAQs

VAT refunds for non-UK businesses

If you’re registered as a business outside the UK and buy goods or services in the UK to use in your business, you may be able to use the VAT refund scheme to reclaim the VAT charged on these costs.

 

Conditions

To use the scheme you must:

  • not be VAT registered in the UK.
  • not required to be VAT registered in the UK.
  • not have a place of business or other residence in the UK.
  • not make any supplies in the UK.

If these conditions are met, UK VAT can be reclaimed on most goods and services bought in the UK for business use including:

  • accommodation and meals.
  • trade fairs.
  • travel costs.
  • 50% of the VAT charged on the hire or lease of a car.
  • other goods and services bought and used in the UK.

VAT cannot be reclaimed on the cost of buying a car, or for goods and services bought for resale, used for business entertainment, or used for non-business activities.

 

How to claim

A claim can be made by yourself by completing form VAT65A – Application for refund of VAT. You can also use a UK Tax agent to submit a claim on your behalf.

A claim for a VAT refund must be made no later than 6 months after the end of the ‘prescribed year’ in which you were charged the VAT. The prescribed year runs from 1 July to 30 June, so you must make a claim by 31 December.

The claim must include the original invoices showing all the VAT being reclaimed and the first claim must be accompanied by an official certificate proving the business is registered in another country. A certificate is then required to be submitted every 12 months if claims continue to be made.

The amount which can be claimed is subject to the following minimum limits:

  • £130 for claims covering a period of between 3 and 12 calendar months.
  • £16 for claims for a whole calendar year, or the remainder of a calendar year if this is less than 3 months.

There is no maximum limit.

You must ensure that any claim is submitted within the prescribed time limits. A claim must be submitted no later than 6 months after the end of the ‘prescribed year’ in which the VAT was charged. The prescribed year runs from 1 July to 30 June, therefore, the deadline for a claim is 31 December.

DO YOU HAVE A VAT QUERY? TELL US ABOUT IT BELOW AND WE'LL BE HAPPY TO HELP

Shorts has more expert tax advisers than any independent firm in our region. Whatever your VAT query, our team is here to help.

The Shorts VAT Team