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HMRC internal manual

VAT Place of Supply (Goods)

From
HM Revenue & Customs
Updated
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Main rules: distance selling: distance sales from the UK

 

EC Law

Articles 33 and 34 Principal VAT Directive
 

33(1) By way of derogation from Article 32, the place of supply of goods dispatched or transported by or on behalf of the supplier from a Member State other than that in which dispatch or transport of the goods ends shall be deemed to be the place where the goods are located at the time when dispatch or transport of the goods to the customer ends, where the following conditions are met:

(a) the supply of goods is carried out for a taxable person, or a non-taxable legal person, whose intra-Community acquisitions of goods are not subject to VAT pursuant to Article 3(1) or for any other non-taxable person;

  
  
(b) the goods supplied are neither new means of transport nor goods supplied after assembly or installation, with or without a trial run, by or on behalf of the supplier.

(2) Where the goods supplied are dispatched or transported from a third territory or a third country and imported by the supplier into a Member State other than that in which dispatch or transport of the goods to the customer ends, they shall be regarded as having been dispatched or transported from the Member State of importation.

34(1) Provided the following conditions are met, Article 33 shall not apply to supplies of goods all of which are dispatched or transported to the same Member State, where that Member State is the Member State in which dispatch or transport of the goods ends:

(a) the goods supplied are not products subject to excise duty;

  
  
(b) the total value, exclusive of VAT, of such supplies effected under the conditions laid down in Article 33 within that Member State does not in any one calendar year exceed EUR 100000 or the equivalent in national currency;  
  
(c) the total value, exclusive of VAT, of the supplies of goods, other than products subject to excise duty, effected under the conditions laid down in Article 33 within that Member State did not in the previous calendar year exceed EUR 100000 or the equivalent in national currency.

(2) The Member State within the territory of which the goods are located at the time when their dispatch or transport to the customer ends may limit the threshold referred to in paragraph 1 to EUR 35000 or the equivalent in national currency, where that Member State fears that the threshold of EUR 100000 might cause serious distortion of competition.

Member States which exercise the option under the first subparagraph shall take the measures necessary to inform accordingly the competent public authorities in the Member State in which dispatch or transport of the goods begins.

(3) The Commission shall present to the Council at the earliest opportunity a report on the operation of the special EUR 35000 threshold referred to in paragraph 2, accompanied, if necessary, by appropriate proposals.

(4) The Member State within the territory of which the goods are located at the time when their dispatch or transport begins shall grant those taxable persons who carry out supplies of goods eligible under paragraph 1 the right to opt for the place of supply to be determined in accordance with Article 33.

The Member States concerned shall lay down the detailed rules governing the exercise of the option referred to in the first subparagraph, which shall in any event cover two calendar years.

UK Law

Section 7 VAT Act 1994
 

7(5) Goods whose place of supply is not determined under any of the preceding provisions of this section and which do not consist in a new means of transport shall be treated as supplied outside the United Kingdom where -

(a)the supply involves the removal of the goods, by or under the directions of the person who supplies them, to another member State;

  
  
(b)the person who makes the supply is taxable in another member State; and  
  
(c)provisions of the law of that member State corresponding, in relation to that member State, to the provisions made by subsection (4) above make that person liable to VAT on the supply;

but this subsection shall not apply in relation to any supply in a case where the liability mentioned in paragraph (c) above depends on the exercise by any person of an option in the United Kingdom corresponding to such an option as is mentioned in paragraph 1(2) of Schedule 2 unless that person has given, and has not withdrawn, a notification to the Commissioners that he wishes his supplies to be treated as taking place outside the United Kingdom where they are supplies in relation to which the other requirements of this subsection are satisfied.

Commentary

Section 7(5) applies where a UK supplier is making distance sales (see VATPOSG3510) to customers in another EC Member State. Without it the place of supply is the UK as the Member State of departure of the goods (see VATPOSG3810). But in cases where a UK supplier
 

  • has exceeded the threshold for such supplies in the Member state of arrival (see below), or
  • has distance sales below the threshold but has nevertheless opted to register for VAT there, or
  • the goods are subject to excise duty in the Member State of arrival

then the place of supply moves to the Member State of delivery.

The distance selling threshold can be set by Member States at either 35,000 Euros (approximately £24,000) or 100,000 Euros (approximately £70,000).

You should note that section 7(5) in providing for the supply to be ‘treated as supplied outside the United Kingdom’ does not actually prescribe the alternative place of supply. For this the UK supplier must look to the relevant legislation in the Member State concerned. That same domestic legislation will also determine the UK supplier’s liability to register in the Member State of delivery.