Selling services overseas
Paying VAT when exporting a service
What you’ll learn
- what is meant by place of supply
- general rules on where to pay VAT
- some exceptions to the general rules
Understanding where you may need to pay VAT when exporting services is an important part of your export planning. Place of supply rules will determine whether you pay VAT in the UK or in the country of supply.
Make sure you are clear on where you are paying VAT before you supply a service, particularly when you are pitching, pricing and writing contracts.
What is meant by place of supply?
When exporting services, the place of supply refers to the place where you make a supply of the service, and where you may be charged VAT.
Working out the place of supply for a service can often be complicated and there are various rules to consider.
For most supplies of services, the place of supply is decided by what’s known as the ‘general rule’. But some supplies are subject to special rules that will affect their place of supply.
The place of supply general rule
The general rule for working out the place of supply of services is as follows:
- if a UK business is supplying a service to a business customer, the place of supply is the place where the customer belongs
- if a UK business is supplying a service to a non-business customer, the place of supply is the place where the supplier belongs
For UK businesses, this means that for B2B customers VAT is paid in the customer’s country and for B2C customers the VAT is paid to the HMRC, in accordance with UK VAT rules.
In case of potential investigations by the HMRC, make sure you have evidence that your customer is outside of the UK. Keep a record of contracts and invoices, and try to obtain a valid VAT or tax ID number for your customer in their country.
International trade adviser
Exceptions to the general rule of place of supply
In some cases, it’s not where the customer or supplier belongs that determines the place of supply, but the type of service that is being supplied.
For example, intangible services like accountancy, intellectual property rights and legal services are often not liable for UK VAT when supplied to a non-business customer.
There are also exceptions to the general rule for:
- digital services
- hiring out a means of transport
- land and property services
- events
- intermediaries
- work carried out on goods
- transport
For further information on the exceptions to the general rule see the guidance set out from the HMRC
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