VAT confusion?

neil3000

Hi guys

I was wondering could anyone help me, im currently in the process of importing 500 t-shirts from china, i have to pay 21% VAT at customs, i am looking to sell them on my online site i have set up. Do i have to charge V.A.T on them still? or do have i it already paid? (I will be mainly selling them to Irish consumers)
Im a sole trader but im not reg for VAT, sorry for the basic question, im just not really sure . Thanks for any help.

dbran

Hi

You cant charge vat if you are not registered for VAT. But you will need to recover the cost of the extra 21% from your customers as it will effectively be a cost to you.

Kind Regards


dbran

srsly78

In other words, you should go register for VAT.

dbran

Hi

You should only really register for VAT if you are selling to VAT registered customers as otherwise you will be increasing your selling prices by 21% to the customer. This could therefore make you uncompetitive. Otherwise if you do not register you could just decide to absorb the cost of the VAT on your purchases.

Also if you decide to deregister, you will have to pay back the VAT on the unsold stock. Thus you need to think carefully before you register for VAT as it may not be the option that best suits you.

Kind Regards

dbran

neil3000

Thanks guys for the help . I wont Reg for VAT just yet, just to make it clear when i do i will have to start charging 21% VAT on all my sales, correct?

antoinolachtnai

When you do, you will be able to claim back input VAT, but you will have to charge VAT on everything you sell.

In practice, this means you have to pay mat on your gross margin. So if you buy t-shirts for 5 euros ex-vat and sell them for 20 euros ex vat, then you will have to pay vat on 15 euros, i.e., 3.15. It's not quite as simple as that because you can also claim back VAT on other input costs, for example, office supplies or courier fees. But that's basically it.

If you haven't worked with VAT before before, go through a few examples on paper and make sure you've really got your head around it. Try and find an accountant or bookkeeper friend to go through it with you and make sure you have the whole thing right.

You are right to begin to prepare for the happy day when you have enough turnover to be required to register for VAT.

Hanley

dbran wrote: »

Hi

You cant charge vat if you are not registered for VAT. But you will need to recover the cost of the extra 21% from your customers as it will effectively be a cost to you.

Kind Regards


dbran

I could be completely missing the boat here, but can that 21% not just be reclaimed in a later period? So it just effects cash?

Say for example you provide a product/service +21%, but the cost to you of supplying that (assuming it's a "skill" based service like an accountant or whatever) is nil.

So output vat is like +21%, input vat is nil - and you reclaim that after you've paid it?

antoinolachtnai

Input vat is nil - so what is there to reclaim?

Hanley

antoinolachtnai wrote: »

Input vat is nil - so what is there to reclaim?

*output/VAT on sales

in, out, shake it all about?

EDIT: actually, you should probably ignore me, I tihnk I just confused myself and then answered my own question

Swampy

srsly78 wrote: »

In other words, you should go register for VAT.

No need to register for VAT as a sole trader if his yearly turnover for goods is under the €70,000 threshold.

Just needs to incorporate his duty and VAT into his cost price before determining what margin he would like.

AndyJB

neil3000 wrote: »

Hi guys

I was wondering could anyone help me, im currently in the process of importing 500 t-shirts from china, i have to pay 21% VAT at customs, i am looking to sell them on my online site i have set up. Do i have to charge V.A.T on them still? or do have i it already paid? (I will be mainly selling them to Irish consumers)
Im a sole trader but im not reg for VAT, sorry for the basic question, im just not really sure . Thanks for any help.

Hi,
Since you’re not VAT registered you do not charge your customers VAT.

As per previous posters you will not be able to reclaim any VAT on your business related expenses either. Review what you’re paying out in VAT and what you’d expect to charge in VAT to potential customers then decide on registration.

If this is a long-term business with potential Turn Over (T/O) above €75k you will have to register once T/O passes this amount. Look at the Revenue VAT info here.

If/When you do register for VAT you will only be able to reclaim and charge VAT from the date of your registration. You will not be able to reclaim any VAT paid out prior to registration.

There’s one other issue you may not be aware of regards imports, you may also be liable for Import Duties as well as VAT. Check with your local Customs/VAT office to confirm if Duty is applicable.

To help you get your numbers correct here’s how the VAT and Duty is calculated on imports by the Customs.

Duty is calc’ed on the full VAT inclusive cost of imported goods as follows....

VAT is calc'ed on (Price of T-Shirts + Cost of Delivery + Transport Insurance, if any paid.)

Duty is then calc’ed on the full VAT Inclusive price.

The attached excel sheet gives you a working example, just plug in the correct numbers and it’ll give you an idea what you have to pay the Revenue/Customs.

Just as important it will give you an idea what the T-Shirts are costing you and therefore what you’ll need to charge per item as a minimum to cover your import / VAT / DUTY costs.

Hope this helps!
Best of luck

RUDOLF289

AndyJB wrote: »

Hi,
Since you’re not VAT registered you do not charge your customers VAT.

As per previous posters you will not be able to reclaim any VAT on your business related expenses either. Review what you’re paying out in VAT and what you’d expect to charge in VAT to potential customers then decide on registration.

If this is a long-term business with potential Turn Over (T/O) above €75k you will have to register once T/O passes this amount. Look at the Revenue VAT info here.

If/When you do register for VAT you will only be able to reclaim and charge VAT from the date of your registration. You will not be able to reclaim any VAT paid out prior to registration.

There’s one other issue you may not be aware of regards imports, you may also be liable for Import Duties as well as VAT. Check with your local Customs/VAT office to confirm if Duty is applicable.

To help you get your numbers correct here’s how the VAT and Duty is calculated on imports by the Customs.

Duty is calc’ed on the full VAT inclusive cost of imported goods as follows....

VAT is calc'ed on (Price of T-Shirts + Cost of Delivery + Transport Insurance, if any paid.)

Duty is then calc’ed on the full VAT Inclusive price.

The attached excel sheet gives you a working example, just plug in the correct numbers and it’ll give you an idea what you have to pay the Revenue/Customs.

Just as important it will give you an idea what the T-Shirts are costing you and therefore what you’ll need to charge per item as a minimum to cover your import / VAT / DUTY costs.

Hope this helps!
Best of luck

Hello Andy,

great post, and well done for trying to clarify the issues for neil3000.

Just to correct one aspect. The duty is calculated over the C(ost) I(nsurance) F(reight) price. The duty is then added to the CIF price for the purpose of calculating the VAT.

I have taken the liberty of amending your spreadsheet to reflect the changes. The duty of T-shirts from China is actually 12%

Cheers,
Rudolf289

AndyJB

RUDOLF289 wrote: »

Hello Andy,

great post, and well done for trying to clarify the issues for neil3000.

Just to correct one aspect. The duty is calculated over the C(ost) I(nsurance) F(reight) price. The duty is then added to the CIF price for the purpose of calculating the VAT.

I have taken the liberty of amending your spreadsheet to reflect the changes. The duty of T-shirts from China is actually 12%

Cheers,
Rudolf289

Thanks for the correction, it's been a while since I've imported.

It's a bit of a pain in the wallet to pay Tax on Tax!

Cheers