In the age of the internet, it’s easy to expand your business internationally and start selling to overseas customers. However, if you plan on exporting then there may be some very significant tax implications to consider.
International tax issues can be complicated, and this is probably something you should discuss with your accountant. As a general guide, however, tax liabilities that you may face when sending goods overseas include:
If you are exporting to customers within VAT-registered businesses within the EU, you can usually zero-rate those sales. This means that VAT is technically charged at 0%, so nothing is actually paid in VAT but it still needs to be reported on your tax return. If you are selling to customers who are not VAT-registered – which should almost always be the case if selling to individuals rather than businesses – then you should charge VAT at the normal UK rate.
Since 1st January this year, there have been some notable exceptions to this last rule. VAT on certain digital goods and services should now be charged at the rate applicable to the customer’s country, rather than at the UK rate.
When exporting to customers located outside the EU, sales can normally be zero-rated. As with exporting to VAT-registered EU customers, this means that sales still need to be declared on your VAT return even though no VAT is actually charged.
When sending goods to countries located outside the EU, you may face international taxes such as customs duties payable in the receiving country. Usually, these will be the responsibility of the customer by default (in which case you should make this fact clear at point of sale), but depending on any arrangements that have been negotiated with couriers or businesses you trade with these charges might be your responsibility.
You may be charged international taxes on profits made outside the UK. This is unlikely to be the case if you are a UK business simply sending goods to a customer who is located overseas and has made a purchase on your website. The majority of the time, you will still be considered to be trading in the UK and therefore only have to pay tax at UK rates.
However, if you have any overseas presence to help with your exports then you most likely will be subject to international taxes. In this case, you will have to work out what proportion of your profits have been earned in the UK and what proportion have been earned in the country or countries in which you have an international presence. This is when things get really complicated, and is definitely a matter to speak to your accountant about.