How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3002
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

following questions assume there are two companies

Customer Question

For the following questions assume there are two companies owned by different people.
UKLtd is a UK ltd and a UK registered VAT payer and CZsro is Czech s.r.o (czech equivalent of ltd) and a CZ registered VAT payer.
The UKltd sell the products via Amazon (US, UK, DE). The CZsro just handles buying the stock and importing it. Amazon's price includes VAT so the UKltd need to file a quarterly VAT return detailing the VAT it collected plus any VAT it paid when purchasing the inventory.
Right now the CZsro is buying the inventory in China and then selling it to UKltd once it arrives in the UK. We are doing this because CZsro has a cash reserve to buy the stock. CZsro is creating invoices for the sale of the stock to UKltd but not demanding payment of the invoices until the end of 2015.
I have a couple questions about VAT and importing and on how to properly setup the invoices.
Right now CZsro is buying the product in China and paying a shipping company to get the product to a UK warehouse. Once it gets to the UK warehouse it is sold to UKltd. The shipping company charges a shipping fee + 30% of (shipping cost + value of goods) to cover VAT and Custom Duty. They said they will then refund any extra money paid after the actual custom clearance happens.
Question 1: For the CZsro VAT return what kind of documentation does it need from the shipping company? The shipping company is a Chinese company so I don't think they are a VAT payer. I think they just subcontracted the whole shipping process to UPS. We asked them for an invoice and they just sent an invoice for the whole cost of shipping and did not break down how much was spent on VAT or Duty.
If you are not familiar with a czech s.r.o. please just answer it as if it is a UK ltd.
Question 2: When the CZsro sells the inventory located in the UK warehouse to the UKltd does it charge VAT? If so what rate does it use? Are there any issues we should be aware of transferring the inventory from CZsro to UKltd
Question 3: CZsro also has inventory in the US. This was bought in China and imported directly to the US so no VAT was ever paid. If CZsro sell this inventory to UKltd does VAT have to be charged? I assume not.
CZsro has also paid for a new order in China that has not been delivered yet. If CZsro sell this to UKltd while the inventory is still in China does VAT have to be charged? I assume this is the same case as with US so no VAT is charged.
Question 4: As I mentioned UKltd is a UK VAT payer. It is registering to be DE VAT payer but this takes time. Currently UKltd sells in Germany with inventory stored in UK. If a German customer requests an invoice on a purchase does UKltd use the UK or German VAT rate?
Thanks for your help and if anything is not clear please let me know.
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.
Firstly tell UPS to comply with UK VAT rules and specify their VAY Number, the amount of VAT charged the rate etc. This is a legal requirement and UPS may not like it, but must comply therewith.
Here, according to the Small Business and Tax Blog is how it operates [DPH is Czech VAT}:
'A VAT-registered UK business importing goods from the Czech Republic should give the Czech supplier its UK VAT registration number (including the GB prefix) so that Czech DPH does not get charged. If DPH is charged, the UK business cannot reclaim it on their UK VAT return or by a direct claim to the Czech tax authorities. The best that the UK business can do in these circumstances is to confirm its VAT registration number to the Czech supplier, then ask for a full credit note and for the goods to be re-invoiced without DPH.
When a UK VAT-registered business imports goods from the Czech Republic from a Czech DPH-registered business, the UK business should pay UK VAT on the import by including VAT in box 2 of its regular UK VAT return, at the appropriate UK VAT rate. It may then reclaim that same amount from HMRC by including it as input VAT in box 4 of the same VAT return, subject to the normal rules about recovering input tax. The reason for this apparently circular exercise is to avoid VAT distortions between buying goods in the UK and importing them from the Czech Republic. The net value of the import should be included in boxes 7 and 9 of the UK VAT return. Imports do not get shown on EC Sales Lists, but are liable to be reported on Intrastat.
You need not concern yourself with the complexities of China/USA capers, it is the charge on import which is the leader in this matter. Remember it is not always charged.
I do hope I have shed some light on your position.
Customer: replied 1 year ago.

Thanks for the answer but I am not sure I completely understand it :)

First does it matter that these goods do not come from the Czech Republic and have never been in the Czech Republic?

They were sent directly from China to the UK by CZsro and CZsro paid the VAT/Duty to HMRC

1. If I understand what you said correctly the CZsro will issue an invoice without charging UKltd dph/vat.

2. The CZsro can then file a VAT return to get the VAT paid when importing refunded.

3. When the UKltd files it VAT return it will need pay VAT on the imported goods.

Is this correct?

Expert:  bigduckontax replied 1 year ago.
In the scenario you submit you have to look at what will happen. Presumably duties and VAt will be imposed on import. The goods will not be released from bond until these are met. According to your question:
'The shipping company charges a shipping fee + 30% of (shipping cost + value of goods) to cover VAT and Custom Duty. They said they will then refund any extra money paid after the actual custom clearance happens.'
So it comes down to a cash flow matter, if these impositions on import have to be paid then CZsro will refund these. If this happens then the cost of sales is reduced.
Now in detail:
1. CZsro would not be charging VAT specifically as the supplies would be effectively zero rated under the reverse charge system providing they have the importer's VAT number. This is quite normal in international commerce within the EU.
2. Why should CZsro receive any refund of VAT? It is the importer who has paid the input tax.
3. Not quite, it has already paid input tax to get the goods released.
Customer: replied 1 year ago.

OK but I am still a little confused

Lets take the following example

CZsro paid a company in china £800 for goods

CZsro paid a shipping company £200 to ship them directly from China to a UK warehouse.

CZsro paid 20% VAT and 3% Duty so .23(1000) = £230

The goods are now sitting in a UK warehouse.

CZsro now sells the goods to UKLtd for £1000. No VAT/Dph is charged on this transaction and there is no profit for CZsro

Question 1: I understand CZsro will not get the duty back but how does CZsro get the VAT it paid (£200) to HRMC back?

Question 2:

I am still confused how UKltd handles this transaction. Do they actually pay VAT or on their VAT return just show they owe VAT on £1000 and balance that with the VAT they collected after selling the goods at a higher price?

Expert:  bigduckontax replied 1 year ago.
CZsro paid a company in china £800 for goods - not relevant.
CZsro paid a shipping company £200 to ship them directly from China to a UK warehouse. - not relevant
CZsro paid 20% VAT and 3% Duty so .23(1000) = £230 - noted
The goods are now sitting in a UK warehouse.
CZsro now sells the goods to UKLtd for £1000. No VAT/Dph is charged on this transaction and there is no profit for CZsro - well not quite VAT is a turnover, not a profit tax, but as the goods are either zero rated in Czechoslovakia or effectively zero rated through the reverse charge system.
Question 1: I understand CZsro will not get the duty back but how does CZsro get the VAT it paid (£200) to HRMC back? - but it does not pay the import duty and VAt, the importer does. The invoice as issued by CZsro is simply incorrect. Settlement of it would result in the importer paying duty and VAT twice. If is is actually paying the duties etc and invoicing for same that is how it gets its costs refunded.
Customer: replied 1 year ago.

I think I am finally starting to understand it but I am confused about the importer

You say "but it (CZsro) does not pay the import duty and VAt, the importer does"

Who is the importer? Since CZsro paid to have delivered to a UK warehouse are they not the importer?

If the shipping company paid the VAT/duty does that make them the importer?

Expert:  bigduckontax replied 1 year ago.
By the importer I mean the UK type organisation who removes the goods from bond. I accept that the term can be confusing. On that basis I think you will be able to follow my answer.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    6894
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Last | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    6894
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.com/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    1772
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    464
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2596
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.com/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    268
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.com/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions