If you supply goods to another EU country these sales are technically known as dispatches or removals rather than exports. The term "exports" is reserved to describe sales to a third country outside the EU.
Dispatches within the European Union (EU) between VAT-registered businesses are not subject to VAT. This also applies to goods imported into the EU that have been released for free circulation following payment of import duties.
However, when you dispatch goods to someone in another EU country, who is not registered for VAT in that country, you should normally charge VAT.
Read more about charging VAT on exports, dispatches and supplying goods abroad.
Customs declarations are not generally required for goods in free circulation within the EU, but traders must remember to raise VAT invoices showing the VAT Registration number of their customers and obtain evidence of shipment.
How to handle VAT within the EU
If your EU customer is VAT-registered and can provide you with a valid EU VAT registration number:
- you can apply the zero-rate of VAT to the sale
- the VAT will be due in the destination country from the customer on acquisition of the goods
- you must keep paperwork that shows both the seller's and buyer's VAT registration numbers (with the correct national codes) on the invoice
- you must number your sales invoices in sequence
- you must also obtain and keep valid evidence that the goods have been removed from the UK within certain time limits to be able to zero-rate
Read more about zero rating.
However if your buyer is not VAT registered, or you cannot obtain their VAT number, then as the seller you must charge the UK rate of VAT.
Every business trading within the EU has to declare its sales on its VAT return. If your sales of goods exceed the applicable exemption threshold during a calendar year, you must also submit Intrastat returns each month.
Intrastat thresholds are reviewed annually.
Every VAT-registered business trading goods with other EU member states is obliged to declare certain information. The amount of information required depends on the value of their Arrivals (purchases or imports) or Dispatches (sales or exports). Intrastat thresholds are reviewed annually and are £1.5 million for Arrivals and £250,000 for Dispatches.
VAT treatment in the EU differs to VAT for international trade
VAT is handled differently depending on whether you're selling to a customer within the EU or outside the EU. Read about charging VAT on exports, dispatches and supplying goods abroad on the HMRC website.
For dispatches or exports, download guidelines on security declarations on export and exit provisions (PDF, 272K).
International trade agreements and free trade associations
The EU also has several trade agreements in place with countries that aren't EU members.
While as yet still an associate member of the EU, Turkey is in a customs union with the EU and thus has a relatively free market for UK exports of goods and services. Goods from EU members receive preferential treatment if they are in free circulation within the EU (eg wholly made or customs duties paid). Turkey follows similar customs procedures to EU member states.
Customs documents are required for exports to Turkey including a preferential statement on the movement certificates called an ATR Form if the goods are in free circulation.
The Isle of Man is in the EU, as part of its customs union and VAT agreement with the UK. The Channel Islands aren't in the fiscal territory of the European Community but are part of the customs territory.
Export declarations for shipments to the Channel Islands aren't generally required for goods in free circulation within the EU, but traders must use sequentially numbered VAT invoices. For controlled goods an export declaration using the National Export System is still required. It is recommended that traders supply a detailed commercial invoice. As with exports to third countries, traders can reclaim VAT once they prove goods have left the UK. There are restrictions on some goods, particularly agricultural goods and chemicals - for instance, it's illegal to import hay and straw (even as packing material) into Jersey.
The European Free Trade Association's (EFTA) four member states are Iceland, Liechtenstein, Norway and Switzerland. Three EFTA states (Iceland, Liechtenstein and Norway) belong to the European Economic Area (EEA), uniting the 28 EU countries and the EFTA states in an internal market. The market enables goods and services to move freely in the EEA in an open and competitive environment. Switzerland has separate trade arrangements with the EU. All EFTA members now benefit from virtually the same privileged relationship among themselves as they do with the EU. For trading purposes, goods moved from EFTA countries to EU members states are treated similarly to goods moved between EU member states. Read more about documentary requirements.
Declarations, duties and licences for dispatches within the EU
You don't usually need to complete a customs declaration for goods sold within the EU. There are exceptions, eg sales to international organisations and special territories.
The EU principle of free circulation allows for goods produced in the EU to be moved around the EU without paying duty. Goods imported from outside the EU may also qualify for free circulation once all import formalities have been completed and import duty and any other customs charges paid. This means that such goods can be sold on the Community market like any product made in the EC.
Some types of dispatch goods, such as weapons and drugs, are controlled and may require an export licence and other appropriate commercial paperwork.