General

After the formal brexit of the UK, according to the new regulations, the e-commerce platform will withhold and remit the sales VAT. Whether and how the imported VAT normally paid before can be refunded has become the most concerned thing for sellers at present.

Two tax refund methods have been analyzed before. One is that the seller logs in to the website to apply for tax refund, the other is that the seller fills in 484 documents and mails them to the tax bureau for tax refund. The problem of how to carry out tax refund has been solved, but there are some problems, such as what needs tax refund, the difference between the declaration methods of independent station sellers and platform sellers, and how to deal with the more and more amount left

Before the tax rebate, first sellers should find out how the tax is refunded.

What is a tax refund?

Tax refund, as the name suggests, means that the tax bureau will refund the tax to the seller. The Department in charge of this matter in the tax bureau is called the repayment department. They need to review whether each tax that the tax bureau needs to refund to the seller's account meets the specifications. The whole review process may take several months, but because there are too many tax numbers registered by British domestic enterprises and offshore companies, Therefore, the Department will review the authenticity of the tax refund in the form of spot check. The seller who is drawn needs to provide information related to tax refund and sales to the tax bureau. If the tax bureau determines that your tax refund is not standardized, you will not only be unable to refund the tax, but also may be fined.

If you are "lucky" to be drawn, the IRS will ask you these questions:

*What transportation company did you import and deliver your goods to the UK?

*What is the address of your overseas warehouse in the UK?

And ask you to provide:

*Purchase / transaction contract between seller company and another company

*The bank flow of goods transactions between the seller company and another company

*If the goods have been sold, you need to provide 10 invoices for goods sales

How to apply for tax refund under different circumstances?

The first case: after the tax reform, the B2C orders of FBA / overseas warehouses do not have value-added tax to be declared (all of which are withheld and remitted by the platform), but there are return orders that have been declared in previous quarters.

Declaration scheme: the tax bureau allows the declaration and adjustment of tax paid return orders in the previous quarter. Whether the seller uses flat tax rate or standard tax rate, the tax bureau allows this adjustment.

The second situation: after the tax reform, there is input tax to be deducted

Declaration scheme: input tax deduction can be declared only when the standard tax rate is used. The flat tax rate will not allow this operation. The seller can submit the C88 and input invoice to be deducted to the accountant for accounting.

*If you deduct C88 (import VAT), you need to entrust the freight forwarder to use your own VAT and eori for customs clearance. After the customs clearance operation is completed, the tax agent will receive c79 document in the second half of the month. The amount of import VAT on c79 document will correspond to the amount shown in C88 document provided by the freight forwarder in the current month.

*If the input invoice is deducted, a compliant UK VAT invoice must be provided. It is required that the seller of the deducted invoice has made a compliance declaration and the purchase and sale is conducted in the UK.

How to deal with the increasing amount of retention?

Before 2021, sellers basically use the low tax rate of 7.5% to declare and pay taxes, but after January 2021, all platform sellers uniformly withhold and pay taxes at the standard tax rate of 20%.

In the past, when the low tax rate was declared, the platform did not withhold and remit, and the sellers used their own tax number for customs clearance, so there was rarely a large amount of tax left. However, now, because the taxes of the sellers are withheld and remitted by the platform, this part of the taxes can not be deducted, and the B2B part that can be excluded does not contain taxes, This makes the seller have a large amount of money left to offset, and will accumulate more and more.

For example, a seller had 1000 pounds of imported VAT that could be deducted, but because the part paid by himself was only 10 pounds, the remaining 990 pounds had to be retained. When only a small part of the amount could be deducted next time, a large amount of retained amount would be left. In the past, the accumulated retained amount would only be more and more.

There are two ways to solve this dilemma

1. According to the new regulations on tax reform, importers can use PVA ("postponed VAT accounting") from January 1, 2021, that is, importers do not need to pay import VAT at the time of goods customs clearance, and can postpone to the later VAT declaration. VAT is recorded as input and output VAT on the same declaration form, and there is no need to pay it actually.

2. Tax refund at the IRS

The premise is that the seller can provide a local bank account in the UK. If not, the IRS will return it to you by check. However, the check cannot realize the tax in China. Therefore, some sellers will apply for a local account in the UK, but the application procedures are quite complicated, Sellers who are afraid of trouble can also conduct tax rebate operations through some mature third-party payment platforms.