Due to the relatively high VAT rate in the UK, many sellers are very concerned about how the tax is calculated and whether they really have to pay 20%. Next, let’s explain.
There are two modes of VAT in the UK, one is called Standard Vat and the other is called Flat Vat. The tax rate for the former is 20%, and the tax rate for the latter is 7.5% (there is also a 1% discount in the first year, so the minimum can reach 6.5%).
Standard Vat: Standard VAT in the UK is 20%. Under the usual mode, your VAT tax number is used for customs clearance of goods, and import duties and import value-added tax are paid during the customs clearance process. After the product is actually sold, quarterly declarations must be made according to the regulations of the tax bureau (the first declaration must be made in the first month after the initial application for vAT). During the quarterly declaration, the value-added tax paid for customs clearance of goods can be made. Deduct VAT tax. And if your sales in the current season are not very satisfactory and the sales volume is less than the import volume, tax refunds will also occur.
Flat Vat: In addition to the standard 20% tax rate, the British IRS also has a lower-than-unified tax rate plan for small retail Amazon sellers called Flat Vat. The Flat Vat tax rate is 7.5%, with a discount of 6.5% in the first year. Sellers with an estimated annual turnover of less than 150,000 pounds can apply for Plat Vat. It should be noted that Flat Vat cannot be used to deduct import VAT, nor can it be refunded.
In 2017, there was a major adjustment to Flat vat. Previously, small businesses were required to have an estimated turnover of £150,000 per year before they could apply. However, in 2017, for sellers who are already qualified for the Flat vat scheme, the tax authorities have changed the tax rate. There will be a relatively large increase from 7.5% to 16.5%.
Although the tax rate has been greatly adjusted, Flat Vat still cannot enjoy the tax rebate offset policy of Standard Vat. As a result, Flat Vat does not have any price advantage.
After the seller’s goods pass through customs, they need to fill in a customs declaration form and fill in the cost and value of the goods. The value of the goods filled in at the customs will be used by the British tax authorities to check whether your company meets the declaration of Flat Vat, which means that you do not need to clear customs with your own VAT number or declare a low value at the customs. Be careful in this situation. The tax bureau may increase your Flat Vat tax rate from 7.5% to 16.5% and deny you various tax refund benefits. The tax bureau will often adjust the VAT scheme from time to time, and European Amazon sellers need special attention.
Next, we will demonstrate the tax calculation method for products under different tax rates. I hope everyone can understand which tax rate you should choose.
1. Standard VAT
We assume that the goods are 3C digital supplies departing from Shenzhen. The tariff rate is 2%, the overall value is 600 pounds, and the sales price is 1,000 pounds. , the first journey fee is £100.
The fee you need to pay from domestic to British customs is import duty and import VAT. The calculation method is as follows:
Import tariff = declared value x import tax rate = 600 × 2% = 12 (pounds)
Import value-added tax = (declared value + first leg freight + import tariff) × 20% = (600 + 100 + 12) × 20% = 142.4 (pounds sterling)
Total payment to customs = 12+142.4=154.4 (pounds)
When sales are generated, the sales price of our products is 1,000 pounds, and the tax rate we need to pay is calculated as follows:
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Market sales price = pre-tax product price + pre-tax product price x VAT tax rate = 833.33 + 833.33 × 20% = 1,000 pounds
VAT tax = price before tax × 20% VAT tax rate = 833.33 × 20% = 166.66 (pounds sterling)
In the case of standard taxes and fees, we can refund the fee. It is against the value-added tax paid by customs, so the final tax we paid here is: 166.66-142.4-24.26 (pounds)
The total tax we paid is: 12+142.4+24.26= 178.66 (pounds sterling)
2. Flat VAT
We assume that the goods are 3C digital supplies departing from Shenzhen, the tariff rate is 2%, the overall value is 600 pounds, sales The price is £1,000 and the first leg fee is £100.
The fees you need to pay from domestic to British customs are import duties and import VAT. The calculation method is as follows:
Import tariff = declared value x import tax rate = 600 × 2% = 12 (pounds)
Import value-added tax = (declared value + first leg freight + import tariff) × 20% = (600 + 100 + 12) × 20% = 142.4 (pounds sterling)
Total payment to customs = 12+142.4=154.4 (pounds)
When sales are generated, the sales price of our products is 1,000 pounds, and the tax rate we need to pay is calculated as follows:< /p>
Consumption VAT – Market sales price When the product is sold, if you choose Flat VAT, the tax you need to pay is 65 pounds.
The total tax after customs clearance plus sales is: 12+142.4+65=219.4 (pounds sterling)
As can be seen from here, after choosing the 6.5% low tax plan, The actual tax paid was 219.4 pounds, which was more than 40 pounds higher than the 178.66 pounds for the standard tax payment plan. Not to mention that when our tax rate is charged at 7.5% or the tax agency is found to be charged at 16.5%, the fee will be higher.
So you must choose taxes carefully, and find out which tax rate will be calculated before filing the tax declaration. Otherwise, if you choose an unsuitable tax rate by mistake, you will be in trouble. out.