Tax & Accounting News
Should overseas customers be charged VAT?
09/08/2011
The VAT rules changed last year in regard to overseas customers but as far as the business charging VAT is concerned, the only criteria is whether the customer is another business or a consumer.
The basic rule is that VAT is not chargeable on supplies to an overseas customer as long as that customer is another business.
If the customer is a consumer, then it depends on where he or she is located.
If they are outside the EU then no VAT is charged but if they are in an EU country, then it is. However, when dealing with HMRC the onus is on the taxpayer to highlight that the customer is a business, otherwise HMRC will assume that it is a consumer. Businesses will have to be able to prove otherwise.
Acceptable evidence to HMRC is that the customer has a VAT number, which can be easily verified using the online checker. If the customer does not have a VAT number then a letter from the tax authority or other government department in their country confirming that they are a business is acceptable.
And more confusing still, the basic rule does not apply for some types of service. For example, those directly relating to land and buildings are always deemed to be made where the property is located. However, for indirect property services, such as investment advice, the basic rule does apply.
There are other exceptions to the basic rules, such as for passenger transport but it is always wise to check with HMRC before charging or exempting any tax.
