Many cross-border e-commerce sellers working on the UK site often face tax issues. The UK tax system is very similar to the domestic tax system, but the tax is much less than that in China. This article will introduce the relevant issues related to the tax rate in detail.
The VAT calculation in the UK is very complicated, so what are the requirements for using these tax rates? What factors need to be considered? When considering which tax rate to apply, some or all of the following situations need to be considered: who provides and purchases the goods; where the goods are provided; how to present the goods; the nature of the goods or services; whether the necessary evidence can be provided; and whether other related goods or services are provided.
In addition to 0% and 5%, the standard tax rate for general goods in the UK is 20%, and a large number of goods sold by sellers are subject to this tax rate.
The difference between the general tax rate and the low tax rate:
1. Sales. If a seller wants to apply for a low tax rate declaration, it is a compliance action that meets the requirements of the tax authorities. And certain conditions need to be met. If a seller wants to apply for a low tax rate, it is expected that the company will send no more than 150,000 euros to overseas positions through the UK in the next 12 months. There is no limit on the general tax rate.
2. Deduction method. After using the low tax rate declaration, import tax cannot be deducted. If the actual annual sales exceed 230,000 pounds, it will automatically exit the low tax rate plan and declare at the normal tax rate of 20%. The low tax rate cannot be applied for the next year! The general tax rate can deduct import VAT.
3. Selectivity. On the surface, after adopting the low tax rate, the tax rate is indeed lower than the 20% tax rate, and the sales tax can also be reduced, but it is worth noting that both the low tax rate and the general tax rate should pay import tax, and the low tax rate and import tax cannot be deducted when declaring this quarter.
If the seller has a large shipment volume this quarter, but the sales volume is small, the import tax is likely to be much larger than the sales tax. In this case, the declaration of the general tax rate can generate a large tax refund. If the low tax rate is adopted, it is impossible to apply for a tax refund, and only a low tax rate of 6% or 7% can be paid. Therefore, as a seller, or according to your own delivery and sales situation, choose a low tax rate or a general tax rate.