Vat treatment on goods exported directly by a UK company to Columbia on behalf of a Dutch co

A Dutch company buys goods from a UK supplier but these are sent directly from the UK to a customer of the Dutch company in Columbia. My understanding is that there are 2 ways this can happen : 1) The Dutch company can have a UK VAT registration so the UK company invoices the Dutch Company with UK VAT . The goods are sent from the UK to Columbia. The Dutch company then invoices the customer in Columbia with zero -rated VAT as an export 2) The goods are exported by the UK company to Dutch Co in Columbia and a UK VAT registration is then not required in the UK I understand scenario 1 , but am unsure of Scenario 2. Does this require the Dutch company to be VAT registered in Columbia ? What is the VAT treatment on the purchase invoice from the UK supplier to the Dutch company and on the sales invoice from the Dutch company to the end customer in Columbia ?

Hi,
We would say that scenario 1 would be the best way to decribe this series of transactions. 
The UK company are making a supply of goods to a Dutch company in the UK so this would be a taxable supply.
The Dutch company are then exporting goods from the UK to Columbia and this would be a zero rated supply of exported goods.
Please see the rules for exporting goods below:
Conditions and time limits for zero rating
As the Dutch company are making a zero rated supply of goods in the UK they could therefore register for VAT and treat the VAT charged to them as their input tax to claim on their UK VAT return.
Thank you.

HI Scenario 1 is what I expected, However what has actually happened is as follows: 1) The UK company has sent a sales invoice to Dutch Co for their purchase (ex works) with zero VAT as an export 2) The shipping documents to Columbia show the UK Co not the Dutch Co as the exporter of the goods to Columbia 3) The Dutch Co has then invoiced the Columbia Co with a zero rated sales invoice (ex works) Is this possible or is it incorrect and the UK company should have invoiced the Dutch Co with UK VAT ?

Further to my reply above, is this an 'Indirect Export' as defined in UK notice 703 ?, and if so is it therefore correct that the UK supplier has zero rated the invoice to Dutch Co even though Dutch Co is registered for VAT in the UK ? : "2.9 Indirect exports An indirect export take place when the following occurs: an overseas person or their agent collects goods from the supplier in the UK the overseas person or their agent takes these goods outside of the UK This applies to goods that are collected ex-works or where an overseas person arranges for their collection. Overseas person is defined in paragraph 2.4. Indirect exports of personal goods in accompanied baggage do not qualify for zero rating. Personal goods means goods that are not intended for business use by an individual. If your business customer is not established in the UK, the supply is eligible for zero rating as an indirect export even if that customer is VAT registered in the UK."

 

Hi. Please see the following guidance as this will cover this scenario: VAT on goods exported from the UK (VAT Notice 703)   . Thank you .

Hi. Please see the following guidance as this will cover this scenario: 4VAT on goods exported from the UK (VAT Notice 703)    . For an export to be treated as an indirect export then the overseas company would need to remove the goods from the UK or arrange for the goods to be removed. I would say that this sequence of transactions wouldn't be covered by the indirect export rules as per Notice 703 section 3.4  . Thank you .

 

Hi Sorry but that link doesn't help as it discusses the situation whereby 2 of the 3 companies involved are UK based not where a UK based company sells to an overseas company but sends the goods out directly to a 3rd company in a different overseas country. I have read that there is a scenario whereby in such a case both the purchase by overseas company B from UK based company A, and the sale from overseas company B to a company C in a different overseas company can be zero rated although the goods are exported directly from UK company A to overseas company C . I am just trying to establish what the conditions need to be to allow this ie so that company B does not need to obatain a UK VAT registration .

Further to your comment above : "For an export to be treated as an indirect export then the overseas company would need to remove the goods from the UK or arrange for the goods to be removed. I would say that this sequence of transactions wouldn't be covered by the indirect export rules as per Notice 703 section 3.4 ." what is your reasoning for this not being an Indirect export ? If the Dutch Company has bought the goods from UK company ex works but has asked UK company to ship them directly to Columbia, then is this not meeting the definition of 'arranging' for the goods to be removed ?

Hi Jane,
I think the key factor is determining where the goods are deemed to be when these 2 supplies are made.
If the supply to the Dutch company is deemed to take place in the UK then this will be a UK taxable supply and UK VAT would need to be added.
If the goods are in the UK but are making a supply to the Dutch company in Columbia then it would be a zero export to Columbia.
If, in the second scenario, the UK is making a supply to the Dutch company in Columbia then will the Dutch company be the importer of the goods in to Columbia to allow them to make a supply of goods in Columbia?
Thank you.

Hi Jane,
I think the key factor is determining where the goods are deemed to be   when these 2 supplies are made.
If the supply from the UK company to the Dutch company is deemed to take place in the UK then UK VAT would need to be added to the sale and if the supply to the Dutch company is deemed to be in Columbia then the supply will be Outside The Scope of VAT
The guidance relating to indirect exports would be relevant where there are 2 parties involved and the overseas customer either comes over to the UK to pick up the goods or they arrange a shipping agent to do this.
Thank you.

Thank you for the responses. The goods were sold by the Dutch Company to Columbia on an ex works basis. This would therefore suggest that the Columbian customer would have been the importer . As such from your response this would appear to be an indirect export as they would have arranged a shipping agent to take the goods from Uk to Columbia. From your responses above this would therefore be Outside the Scope of VAT so it will be correct that the UK company invoiced the Dutch company with no VAT ?

Hi On the basis of the above could you please confirm or correct the following scenarios . In all cases the UK company (UK) is selling ex works to the Dutch company (NL) but the goods are being shipped directly from the UK to a business customer in Columbia (Col): A) UK exports the goods directly to Col on behalf of NL UK is exporter Col is importer Place of supply to NL is the UK Invoice from UK to NL includes UK VAT which NL can reclaim if UK VAT registered All import taxes are paid by Col B) UK exports goods to Columbia with NL as the importer (FCA terms) UK is exporter NL is importer Place of supply to NL is Columbia Invoice from UK to NL is zero rated as an export NL settles any import taxes - does this scenario require NL to have a VAT registration in Columbia ? Invoice from NL to Col is out of scope ? C) Col arranges with an agent to collect the goods directly from the UK Col is both exporter and importer Place of supply to NL is UK Invoice UK to NL includes UK VAT Invoice NL to Col is out of scope D) is there a scenario with different selling terms which enables both the invoice UK to NL and NL to Col to be zero rated / out of scope and Col settles all import taxes directly ?

Hi, We wouldn't be able to provide definitives regarding whether a sale would meet the criteria of an indirect export. It would always be a case of referring to the relevant guidance , Notice 703 section 3.4 and making a decision based on those rules  . Thank you .