Debitoor Dictionary

Accounting terms explained in a simple way

Import VAT - What is Import VAT?

Import VAT is a tax you pay on goods purchased from another country within the European Union (EU).

The opposite of importing? Exporting. Check whether you should pay Export VAT on any goods or services sold to customers abroad.

Import VAT is only applicable to countries within the EU. If you purchase goods from non-EU countries, you may need to pay Customs Duty instead.

Import VAT is applied to all purchased goods worth more than £15; all gifts worth more than £40; and all goods, regardless of value, which are sent to the UK from the Channel Islands.

What is the rate of Import VAT?

The VAT rate you are charged on imported goods depends on whether your business is VAT registered.

If your business is registered for VAT in the UK, you will pay VAT at the same rate as if you had purchased the goods from a UK supplier – normally 20%.

Businesses registered for VAT should record Import VAT should be recorded in their VAT Return. Import VAT can usually be reclaimed in the same way as VAT on domestic purchases.

Your VAT Return must be completed in sterling, so if you paid for goods in another currency, you must convert this into GBP, based on the exchange rate at the time of purchase.

If you have not registered for VAT, you will be charged VAT at the local rate of the EU country in which your supplier is based. For example, if your UK business purchases goods from Denmark, you will be charged the local VAT rate in Denmark, which is 25%.

Import VAT on Services

If you are purchasing services from another EU country, you should follow a procedure called reverse charge, also known as ‘tax shift’.

This is when you credit your VAT account as if you had supplied the services yourself, then deduct the same amount – the two cancel out meaning you do not pay VAT.

Import VAT and Debitoor

With Debitoor invoicing software, it's easy to keep track of VAT.

Debitoo you can automatically create VAT reports and view in real-time the amount of VAT you can pay or reclaim.