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Do I Have to Pay VAT on Services from the EU?

Oct 6, 2022 | European VAT

Are you wondering if you have VAT on services from the European Union? Then allow us to help you!

Do I Have to Pay VAT on Services from the EU? – A Complete Guide for Buyers

If you are looking for the correct information on VAT as a UK buyer, then you are at the right place. You might be an individual or group organization considering importing or purchasing services from the European Union.

This article considers all the helpful information that you require. The discussion is all about “Do I Have to Pay VAT on Services from the EU” as a UK consumer. 

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If this topic sparks your interest, then it is favourable for you to proceed. The article explains the function of VAT, especially for the UK citizens planning to purchase from the EU countries.

The post-Brexit situation is kept under consideration. All the important terms have been defined. Therefore, the article gives you a clear picture of what you should do. 

What is Value Added Tax (VAT)

Before moving on to the matter, considering if you have to pay VAT, it is essential to know what VAT is. The Value Added Tax or VAT is the tax amount that is the indirect tax deducted while purchasing products.

That is to say that the tax amount goes to the government through the supply chain, starting from consumers, through retailers, distributors, manufacturers, and producers to the government. 

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Who Pays the Value Added Tax?

In the light of the previous section, it is evident that consumers have to pay VAT to the businesses. The tax is charged along with the price of the product at the time of purchase. Moreover, the businesses are required to pay VAT to the government. 

It is also to be noted that the VAT for the multinational firms is only payable to the government where their headquarters are located. In the host countries, only the sales tax may apply.

With that said, let us now consider the topic question: Do I have to pay VAT while receiving services from the EU in the UK?

Do I Have to Pay VAT? – In post Brexit Era

The question persists: Do I have to pay VAT on services from the EU? The answer is Yes, but the consumers are required to pay the UK VAT and not the EU VAT. However, this needs to be further elaborated, and this section discusses the very details that are required to comprehend the matter. 

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It is important to note that VAT rules apply according to the country where the customers are located. Therefore, Brexit has made a significant difference in the UK VAT system.

The United Kingdom had been a part of the European Union until December 31, 2020. All the sales occurring in the UK before Brexit had been subjected to the EU VAT rules since it was a part of the EU. 

However, after Brexit the UK is no longer a part of the European Union; therefore, only the UK VAT rules may apply. That is to say that the post-Brexit rules apply from 1 January 2021.

As far as the post-Brexit situation is concerned, the new rules may apply with some relaxation. In any B2B business supply chain where the customers are located in the UK, reverse charges apply to the importers.

As discussed above, if you are buying from the EU countries in the post-Brexit era, then you are not required to pay EU VAT. Therefore, it would be best if you were mindful that the suppliers do not charge you the very VAT.

Otherwise, you will be required to request the correction in order to prevent loss. To get help with that, there are specialized agencies where you may consult. 

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VAT New Rules

According to the new rules, all businesses across the globe shall be required to VAT register in the UK for operating. That includes the EU businesses as well. The consumers shall be required to pay VAT on services that cost higher than $135. 

Although there is no import VAT, the seller will be required to charge supply VAT. The latter shall be held accountable for this VAT amount to the authorities. These rules are applicable to all the price values of the services. 

Reverse Charge

A reverse charge implies that the buyer of the services is held accountable for paying the VAT to the revenue and customs department. This means that the businesses operating in the UK have to pay the VAT for the services they receive from sellers across borders.

The supplies that they receive must be taxable. Moreover, the buyers that are registered for VAT and construction industry schemes also have to pay this tax. 

Frequently Asked Questions

  • How to receive services?How to receive services?

    You shall be required to provide your UK VAT number. Based on the provision of the VAT number, you may receive the services through reverse charge. If you think about how to do this, then we might have a solution for you.

  • When Do I Have to Pay the VAT? 

    Since the formulation of new rules, the UK buyers have to pay the VAT at the time of VAT return instead of the time of import. Are you still confused? Do not worry; we are the team of experts that can help you with this.

  • What are import VAT and Sales VAT?

    Under the new rules, the buyers may expect to pay VAT at the time of sale instead of the time of import. The former type of VAT is Sales VAT, and the latter is Import VAT. If you are still wondering, ‘how do I have to pay VAT?’ then we might be able to help you.

  • How to Get a UK VAT Number?

    You are required to register for VAT by applying to HM Revenue and Customs. For this purpose, you may register for an online VAT service with HMRC, or you may opt for the assistance of an agency. Contact us to get our quality services.

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So now we know much about VAT and paying it for receiving EU services. VAT is the tax that is added at every point of a supply network. The consumers have to pay this tax to the businesses, and they, in turn, pay to the government. The VAT rules for the UK have been quite complex due to the pre and post-Brexit era.

Nevertheless, since the exit from the European Union, the country is not bound under EU VAT rules. The government imposes a reverse charge if the consumption value increases to a specific maximum.

It is also evident by now that as a business entity operating in the UK, you are required to follow the new rules. 

Moreover, the UK also provides relaxation to the buyers. They are allowed to pay sales VAT instead of import VAT. All this might still be confusing for you, and you might prefer to consult a team of experts. 

If you are concerned about VAT terms and conditions or you require help with all the complications associated with VAT, then do not worry and look no further.

We are accounting and VAT specialists for the eCommerce business. It is our duty to handle your respective matters. We facilitate your business operations across Europe. 

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