Goods supplied to another country within the EU classify as dispatch goods and not exports, the latter referring to goods that are sold to a country outside the EU. Here are some general aspects on VAT and the how it applies to dispatch goods.
VAT in EU and free trade association countries
First of all, it should be noted that no VAT is charged for goods dispatched from one VAT-registered business to another within the EU or any imported goods released for free circulation. However, it is charged for goods dispatched to a non-VAT-registered business within the EU. The recipient’s registration number must be indicated on the VAT invoice, which must also contain evidence of shipment. Thus, no customs declarations are required for imported goods released for free circulation.
Let’s assume your customer within the EU has a valid VAT registration number. Then:
- you can opt for a zero rate VAT – in order to be able to do that, you need to provide evidence which reveals that the goods have been dispatched from the UK within acceptable time limits;
- they will be charged for the VAT in the country of destination upon acquisition;
- you must be able to present documents containing both your and your customer’s VAT registration numbers at any time;
- your sales invoices will have to be numbered in sequence.
Should your customer not have a valid VAT registration number, then the UK VAT rate will be charged. It should also be noted that the whole VAT issue is addressed differently depending on the country of destination, whether it is an EU country or not.
Intrastat and Intrastat returns
Intrastat is a system which collects all the information provided by EU traders on their sales in order to monitor the dispatches and acquisitions made by EU member states. EU traders must declare all their sales on their VAT returns. Should they exceed the exemption thresholds set per calendar year, which are currently set at 1.2 million pounds for arrivals and 250.000 pounds for dispatch goods, they must submit these so-called Supplementary Declarations (SD) monthly. Any delay in submission or submission of incorrect is penalised.
It should be noted that commodity classification codes are provided to be used when filling out these declarations. Thus, they will contain the commodity code corresponding to the goods in transit, their value in sterling, the net mass or supplementary unit, the nature of the operation, the destination, the agent’s details and terms details should the 24-million-pound threshold be exceeded. In fact, the amount of information to be provided may vary depending on the value of the goods. Should the value of the dispatch goods or arrivals be below the thresholds mentioned above, then it suffices that only the value of the goods dispatched to other countries within the EU and that of arrivals acquired from other countries within the EU be written down in boxes 8 and 9 respectively of the VAT return.