VAT stands for Value Added Tax. It is mostly charged on the supply of goods and services provided by a UK VAT registered business. However, it can be charged on imports from outside the UK. In transactions made between two VAT registered companies, the buyer can usually claim back the VAT paid.
Find out more information about UK VAT, including who charges VAT? And what VAT is charged on?
Import VAT is a tax charged on imported goods. This includes:
that undergo free circulation in the UK.
Please note: Free circulation is when goods are cleared through import customs anywhere within the E.U.
There are two instances in which goods become exempt from Import VAT, these include:
Please note: E.U. special territories include: The Aland Islands (Finland), The Canary Islands (Spain), The Channel Islands (UK), The French Overseas Departments of Guadeloupe, French Guiana, Martinique and Reunion and Mount Athos also known as Agion Oros (Greece).
There are also some goods, which are automatically exempt from import VAT. These include:
The Import VAT rate is charged at the same percent that applies to similar UK goods. It is calculated based on the total value of the imported goods in pounds sterling. However, on goods from outside the E.U. the VAT rate is calculated based on the Customs Declaration. This is inclusive of value of the goods, the transport costs, the postage and packaging, insurance costs and any payable duty.
The 3-step formula, is as follows:
The VAT rate is dependent upon the goods/services being imported. Three different rates apply:
However, some services/goods are exempt from VAT or outside the system altogether. Different circumstances arise with gifts.
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