Import VAT - What is Import VAT?
Import VAT is a tax paid on goods purchased from another country outside 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 goods coming from countries outside the EU. If you purchase goods from non-EU countries, you may also need to pay Customs Duty if the worth of the goods is over £135 (as of September 2018).
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 that would typically apply when you purchase goods from within the UK – normally 20%. The import VAT is paid on the total amount determined for the shipment: the value of the goods, the shipping & handling costs, as well as any duties or levies that can be applied.
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.
Import VAT on Services
For tax on services sourced from countries outside the UK, there are a number of steps that should be followed. However, this can be applied both to services from EU countries, as well as non-EU countries.
If you are purchasing services from outside the UK, 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.
Purchase of goods from within the EU
The purchase and import of goods from within the EU is known as 'acquisition'. As an intra-EU purchase, the goods are subject to VAT payment, however this can be claimed back in your VAT return as long as you're VAT registered. Intra-EU goods are not subject to import duty.
Import VAT and Debitoor
With Debitoor invoicing software, it's easy to keep track of VAT. VAT can be recorded both as supplier and as purchaser, allowing you to see both incoming and outgoing VAT.
Debitoor allows you to automatically create VAT reports and view in real-time the amount of VAT you can pay or reclaim.