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bigduckontax
bigduckontax, Accountant
Category: UK Tax
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Experience:  FCCA FCMA CGMA ACIS
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Hello, I have a Limited Company which is Hong Kong registered

Resolved Question:

Hello,
I have a Limited Company which is Hong Kong registered and live and work in Shanghai China. I send goods over to Amazon UK and a distribution center in the UK to fulfill my sales. All though they post all over the world sales are mainly t private individuals in Europe and the UK.
Total sales are about to go over the UK threshold of £79,000 turnover but much of that is in Germany Italy and France.
At what point do i register for VAT?
1. Do I just register in UK?
2. Do I register in separate countries when I reach their own thresholds whatever they are? e.g. My total turnover might be £150,000 but because sales are split between lots of countries do I only register and pay VAT when I hit that Countries threshold?? and pay VAT to that Country?
Thank You XXXXX
Submitted: 8 months ago.
Category: UK Tax
Expert:  bigduckontax replied 8 months ago.
Hello, I'm Keith and happy to help you with your question.

Hong Kong profit tax for companies is currently 16.5% as, for example, opposed to the UK's starter rate of 18%. Hong Kong raises 40% of it's income through taxes.

If you invoice direct from the HK company there is no requirement for a HK company to register in the UK or, indeed, any other EU country for that tax. If you invoice from your UK distribution centre then you will need to register for VAT. Of course your export sales will be zero rated and you will be able to reclaim input tax imposed on importation. Where your company's banking arrangements are made may also be of significance.

Am I helping so far? Please don't hesitate to come back to me.
Expert:  bigduckontax replied 8 months ago.
A further comment, it's from the HK Government on the advantages of being a HK based business, taxation wise:

'Hong Kong has one of the most tax-friendly economies in the world. Why? The city only imposes three direct taxes and has generous allowances and deductions which reduce your taxable amount.

Low and simple tax regime
Profits tax is capped at 16.5 percent
Salaries tax is a maximum of 15 percent
Property tax is 15 percent
More important are the taxes that Hong Kong does not impose:

No sales tax or VAT
No withholding tax
No capital gains tax
No tax on dividends
No estate tax
The ease of submitting tax returns is another attractive part of Hong Kong’s business environment. Many people complete their tax returns themselves – a simple process – and can submit them online. Others rely on Hong Kong’s many accountancy firms, large and small, for cost-effective tax services and advice.'

You have probably already seen this, but you might like to know your advantages!
Customer: replied 8 months ago.

Hi keith,


 


Just confirming you got the follow up question I appreciate you may need to think about the VAT position but my follow up question hasn't appeared in this discussion yet

Customer: replied 8 months ago.

 


Hi, Keith


To repeat my previous response


a. for the Hong Kong company we have a UK account at HSBC for sterling payments. We have an Irish account for Euro payments. this latter bank feeds into HSBC UK account. Some money then goes to Hong Kong bank to pay suppliers in china other money goes to pay Amazon and the UK distributor (totally independent co.)


 


1. What I need to know is as we are selling world wide do we only register to pay VAT when we exceed the registration ceiling for each country we sell to i.e. total turnover maybe £150,000 or anything but providing we are below threshold turnover for VAT in each country we are OK? true or not

Expert:  bigduckontax replied 8 months ago.
Yes, I was that might be the case and puts a wholly different complexion on the problkem. The whole thing becomes much more complex as you have a warehouse in the UK, I assume not in a tax free zone. HMRC's general guidance is:

'Registration of UK suppliers in other EC Member States

One effect of the place of supply rules is that UK suppliers can find themselves liable to register for VAT in other EC Member States. Liability to register (and any consequent requirement to appoint a local tax representative) is governed by the rules as they are applied in the Member State concerned. You should not offer any opinion as to whether a UK business might be required to register for VAT elsewhere within the EC. Enquirers should be advised to contact the appropriate VAT authority. Contact details can be found on the website referred to at VATPOSG1100.'

It gets worse An European Court ruling indicates that there is no UK trigger point for VAT, one must register as soon as one begins trading, viz:

'The UK has always allowed its domestic VAT registration threshold (currently £77,000) to apply to NETPs who make taxable supplies in the UK, as well as to UK businesses. NETPs include, for example, non-UK traders at farmers’ markets or Irish service suppliers working across the land border. However, a decision (Schmelz C-97/09) in the CJEU (the European Court of Justice) has confirmed that only businesses established in a Member State can benefit from its domestic VAT registration threshold.

Therefore, a new Schedule 1A to the VAT Act 1994 and other consequential changes were made in Finance Act 2012 and come into force on 1 December 2012.

From 1 December 2012, any non-established business which makes or intends to make taxable supplies in the next 30 days has 30 days from the date it formed that intention to notify HM Revenue & Customs (HMRC) that it is required to register for VAT. Businesses which become required to register in the UK on 1 December 2012 will have to notify HMRC of that fact by 30 December 2012.

A business not established in the UK will be required to register from the earliest of the date that it made or expected to make taxable supplies in the UK (but no earlier than 1 December 2012). Non-established businesses which are aware that they will need to be registered from 1 December 2012 (for example, because they are already making supplies in the UK under the current threshold) can provide advance notice to HMRC, and they will be registered for VAT from 1 December 2012.

Existing UK place of supply rules have not been changed. Overseas businesses making only reverse charge supplies of services to the UK will not normally be affected by the removal of the threshold. However, there are some exceptions that are taxable supplies in the UK where they are supplied to a private customer rather than to a business, for example, services in connection with land which is located in the UK or entertainment services when the performance takes place in the UK.
Overseas businesses only involved in distance sales or acquisitions are not affected by the removal of the VAT registration threshold.
Any NETP business which is required or entitled to register for VAT can apply for VAT registration either online or by completing form VAT 1.'


To put it bluntly it's a bit of a bugger; it appears your organisation should have registered and that's only the UK; if you have depots and trade in other EU states you may have to register there too. In Germany for example one has to register even if one does only one Euro's worth of business!

You must think seriously and with some urgency of appointing local agents to advise and act for you in this matter and these don't come cheap. Sorry to be so negative, but you are entering a real VAT minefield.
Customer: replied 8 months ago.

hello again,


2 points of clarification. 2 observations and 1 last question


 


1. We do not have a depot in the UK. As mentioned in my post we either send goods to Amazon or for eBay purchases on line to an independent Co. that then packs and posts to the end user who are private individuals.(that company does it for many other businesses not just ours). This is just a fact and as such UK corporation tax isn't we understand incurred


 


2.We are obviously not distance selling because we based outside Europe and it does not apply.


 


3. . The disturbing point is that so far as we were aware and our obviously simple reading of HMRC guidelines and advise of other Chinese business operators rather than a UK adviser such as yourself, that as an offshore company we pay appropriate taxes for Hong Kong (which appears at least to be correct) and VAT at the threshold for the UK. Hence the original question asking for clarification as what counties threshold if we sell to more than the UK.


 


4. Depending on how you look at it, fortunately the Hong Kong company was only formed in late June with the idea that we would take over some smaller sole traders who have been selling on eBay etc (Europeans doing their thing from China who are now going back home and leaving China) , As so we have only just reached these high levels and done so within a very very short period by just taking on existing businesses.


 


Just 2 last questions:


 


Please confirm a) we need to register for VAT and this bit I now hope is true within one month of the end of the month in which we started selling to the UK and


b) this is the case for all European Countries


 


Finally Thank You in anticipation you have been concise and have answered questions that many "experts have avoided"


Thank You


Brett


 

Expert:  bigduckontax replied 8 months ago.
Right, I can't give you guidance on other non UK jurisdictions.

I see your position now. As you don't have a depot in the UK and are trading through Amazon who are registered for UK VAT I don't see a problem. Amazon will be doing the VAT for you effectively. You don't have to register as you don't sell in the UK, Amazon etc do on their own account, and you don't have to register to sell into the UK, only if you sell in the UK. There is a subtle difference. In my view you don't have to register at all, just leave it to Amazon.

Have I enlightened you? The difference is very subtle between selling into the UK from HK or selling in the UK.
bigduckontax, Accountant
Category: UK Tax
Satisfied Customers: 714
Experience: FCCA FCMA CGMA ACIS
bigduckontax and 3 other UK Tax Specialists are ready to help you
Expert:  bigduckontax replied 8 months ago.
Just a further thought for information. If you see the British Press in HK you may have noticed recently heavy criticism of big firms tax avoidance antics eg Vodafone. Amazon was high on that list too!
Customer: replied 8 months ago.

 


One problem with your advise is it maybe too good. I apologise in advance but I cant let you go just yet! Excellent service to be well recommended and i will post accordingly.


But we will be taking on the eBay sales and these items are sent to a Fulfillment Center other than Amazon. Unlike Amazon they do not deal with sales we will be dealing with that in China. So I guess as far as eBay sales are concerned we will in accordance with your guidance be paying VAT for eBay sales, However, from the Amazon reference we will at least not be paying Vat for their sales.


thank You.


Brett

Expert:  bigduckontax replied 8 months ago.

eBay operates from the Luxembourg, so no worries there for an HK company!

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