UK business selling goods straight from EU supplier to EU customer

VAT Question

Our client sells machinery to businesses customers that are based in the EU and registered for VAT in the EU countries in which they are based.

My client’s sole supplier is based in Poland and although my client usually imports the machinery to the UK before sending it to their customer, some customers have now suggested that although they still want to buy the machinery from my client, they have asked that the machinery be delivered directly to them from the supplier in Poland. What are the EU VAT implications of my client agreeing to this?

VAT Answer

Prior to Brexit, had your client made a supply in this way, the transaction would have been zero-rated by both the Polish supplier and your client under the EU’s triangulation simplification rules.

However, from Brexit these simplification rules no longer apply when UK based businesses are involved.

Instead your client will have a requirement to register for VAT in either the country from which the goods are dispatched (Poland) or in each EU Member State in which his customers belong.

Guidance suggests that the choice as to whether your client registers for VAT in Poland or in the EU countries in which the customers are based is up to your client, but each has its own consequences:

If your client chooses to register for VAT in Poland, then:

• The Polish supplier will charge Polish VAT on their supply to your client; &
• Your client will claim this Polish VAT as Poland’s equivalent of input tax on their Polish VAT return; &
• Your clients’ sale will be a zero-rated EC sale of goods from Poland.

However, if your client chooses to register in each EU country in which his customers are based then:

• Upon your client giving them their relevant EU Member State VAT registration number, the Polish supplier will zero-rate their supply to your client as an EC Sale; &
• Your client will treat the purchase as an EC Acquisition on their VAT return in the respective country in which their customer is based; &
• Your client’s sale to their customer will be subject to VAT in that EU Member State.

Of course, the second option above could mean multiple EU VAT registrations across the EU and so, logistically, it would seem better to choose to register for VAT only in Poland.