Since the establishment of the EU single market in 1993 the VAT treatment of trade between EU and Non-EU countries is subject to different rules to intra-community and domestic trade.
In the context of VAT, exports refer to goods supplied from the EU to destinations outside the EU while imports refer to goods imported into the EU from outside the EU.
As a general rule, imported goods are liable to VAT at the same rate of VAT which applies to those goods if they were supplied in the country of importation. Import VAT is chargeable at the time of importation, this is usually done by completing a SAD (Single Administrative Document). Imports of goods are liable to VAT by both VAT registered and non-VAT registered private consumers. VAT is assessed on the invoice value including insurance, transport costs, freight to the point of import and inland freight, customs and excise duty and any commissions. VAT registered traders can recover this import VAT in the normal manner through their VAT return. Where goods are not imported for the purposes of making taxable supplies, or they relate to the importers exempt supplies or are imported by non VAT registered persons then VAT recovery would not be possible.
For VAT purposes, imports are goods arriving from non-EU countries, and in this context it should be noted that the Principality of Monaco and the Isle of Man are treated as in the EU while the following territories are regarded as not being part of the EU for VAT purposes;
- Livigno, Campione d’Italia and the Italian Waters of Lake Lugano
- The Canary Islands
- The Channel Islands
- Overseas Departments of the French Republic
- Republic of San Marino
- Mount Athos (Greece)
- Åland Islands (Finland)
VAT Free Imports
Subject to certain conditions, where goods are imported from outside the EU into Ireland and at the time of importation are already consigned to another EU Member State, the zero rate of VAT may apply.
Under the VAT 13A scheme, a trader who derives 75% or more of annual turnover from zero-rated intra-Community supplies of goods or from exports of goods may apply to have their imports, intra-community acquisitions and the purchase of most goods and services zero-rated.
The zero rate of VAT applies to all supplies of goods which are transported directly by or on behalf of the supplier or by a non established purchaser or a person on his behalf, to a place outside the EU. If goods are first delivered to another EU member state before being exported then an intra-Community dispatch occurs first followed by an export. But if the goods merely transit through another member state on their way to being exported then there is no intra-Community supply, only an export. The entitlement to zero rate an export is dependant on the suppliers ability to provide evidence to satisfy the Revenue that the goods have been exported outside the EU.
Consideration should be given to the VAT consequences of importing and exporting goods. VAT on imports will need to be accounted for at their point of entry, while the zero rate of VAT on exports should be evidenced by documentary proof of export retained for Revenue audit purposes.