A set of internationally recognised rules issued by the International Chamber of Commerce. They define the responsibilities of buyers and sellers in international transactions. For companies trading cross border, understanding how VAT relates to Incoterms within contracts is key to avoid unwelcome costs and delivery delays. The 11 Incoterms set out who’s responsible for each element of the sale of goods including documentation and customs clearance, shipment and insurance. There are two Incoterms that can cause VAT issues: (Insert named place of delivery) Incoterms® 2020 Buyer’s responsibility Seller’s responsibility Transfer of risk Export Formalities Import Formalities EXW: EX WORKS BUYER ! INCOTERMS ® CROSS-BORDER BUSINESS VAT IMPLICATIONS FOR Ex WorksDDP WHICH INCOTERMS AFFECT VAT IN THE EU? With Ex Works, transport obligations, costs and risks are the responsibility of the buyer. The risk transfers from seller to buyer before the transport journey starts. The buyer agrees a collection point for the goods, which becomes the delivery point. Example a French customer buys goods Ex Works from a UK supplier. The customer must declare the export from the UK. This creates obligations in the UK for the French customer who will then import the goods into France. SELLERWhatever your VAT implications, Sovos has the expertise to help you navigate Incoterms and the complexities of cross-border tax obligations. COMPLIANCE PEACE OF MIND WITH A COMPLETE, GLOBAL VAT MANAGED SERVICE FROM SOVOS (Insert named place of delivery) Incoterms® 2020 Buyer’s responsibility Seller’s responsibility Transfer of risk Export Formalities Import Formalities DDP: DELIVERED DUTY PAID With DDP, the transport obligations, costs and risks are the responsibility of the seller. The destination point the seller or carrier will transport goods to is the same as the delivery point. SELLER BUYER ! UK sellers are required to export goods from the UK and import them into the EU. UK sellers need to establish if/how import VAT is recovered and also what duty will be paid. These points will impact the profit on the sale. ? UK sellers need to account for local VAT unless the extended reverse charge applies. Where a local VAT registration is required compliance with this requirement may cause delivery delays whilst the VAT number is issued and additional costs. VAT If goods are delivered without the required VAT registration, then penalties and interest for late registration and late payment of VAT may apply. Example A French customer buys goods DDP from a UK supplier. The supplier must declare the import into France. This creates obligations in France for the UK supplier. The supplier exports the goods from the UK. POST-BREXIT UK companies may have DDP contracts with EU customers with potentially unintended consequences: ! Sovos Europe@SovosEurope www.sovos.com/contact / emeainfo@sovos.com For further information please contact: Argentina / Brazil / Chile / Colombia / Mexico / Netherlands Peru / Sweden / Turkey / United Kingdom / United StatesNext >