Guide

International Commercial Contracts - Incoterms

Incoterms and VAT

VAT is not covered as part of the 'costs' under any Incoterm, but it is payable on many international trade transactions. Summaries of when you have to pay import VAT and export VAT are given below. If you wish to agree that the buyer or seller is responsible for paying VAT, it should be written as an addition into the sales contract as it will not be covered by the Incoterm.

Import VAT

Generally, you must pay VAT on imported goods at the same rate that the goods attract if they were supplied in the UK. The procedure for making payment depends mostly on whether the country from which you are importing goods is inside or outside the European Union (EU). You can reclaim VAT from goods imported from within the EU when you declare them on your VAT return.

Find out more about tax, VAT and excise duty when trading internationally.

Export VAT

When you export goods outside the EU you can usually zero-rate the goods for VAT. To qualify, the goods must leave the EU within a set time limit and you must keep records of the sale and transport of the goods. Separate rules apply to goods that are moved through EU countries to other EU countries. Goods exported to a customer outside the EU can also be zero-rated for VAT even if they initially travel through other EU countries.

Find out more about importing goods and services and VAT.