How to Apply VAT against your LTD/LLC Company in UK or USA [ URDU ]

How to Apply for VAT against your LTD/LLC

As I posted about VAT registration in UK which is essential – the video was cut down at the end due to software issue but it should give you at least an idea how this whole thing works and what value to fill in.

Ideally you should be asking this from your accountant to do this but this overview gives an understanding of how and what is require in order to get it going and the process is simple if you have the accurate knowledge of your company and which are you opting in for.

Always better to take advise from professional accountant in your scenario – however keep in mind VAT is needed anyway down the line.
Those who are confused how VAT works – please understand these scenarios:

Altaf is importing headphones into the UK from Pakistan (a non-EU country) to sell in UK. In order to do this Altaf must present the imported products to customs so that he can pay all necessary import taxes, including VAT and duty (if applicable)

Altaf wants to import 10 products from Pakistan to the UK. Each product has a value of 10 GBP. He is required to pay 20% Import VAT, or 20 GBP (10 products X 2 GBP VAT each = 20 GBP in VAT). He pays this amount to the Tax Authority, and can now import the products into the UK
Now Altaf can start selling. He plans to charge a customer 20 GBP for each set of headphones.

Altaf is aware that he has to charge VAT on every sale he makes in the UK. So he includes the VAT of 4 GBP (20% of the price) in the displayed price, which now becomes 24 GBP per unit.

Maria, a buyer in the UK, sees and orders a pair of Altaf’s headphones.
When Altaf ships the headphones or as an FBA to Maria he also attaches the UK VAT invoice or use the automated VAT invoice service from Amazon.

Let's understand below three scenarios to get more understanding after Altaf gets a VAT number.

Scenario 1: Altaf does not sell any other product by the end of the fiscal period. So when he submits his VAT returns to the Tax Authority he declares the VAT amount he paid (20 GBP at Customs) and the VAT amount he collected so far on sales (4 GBP collected when he sold one headset). Steve can now claim back 16 GBP (the difference between VAT paid and VAT collected) from the UK tax authorities (please note that such a claim can be subject to approval). (The tax authorities are reimbursing Altaf for the difference in VAT (this can include a verification process).

Scenario 2: Altaf sells 4 more products by the end of the fiscal period. He files a VAT returns file with the Tax Authority. He declares the VAT amount he paid (20 GBP at Customs), the VAT amount he collected so far (4 GBP x 5 units = 20). (VAT collected on sales completely offsets VAT paid at import, so he claims no VAT back.)

Scenario 3: Altaf sells 5 more products by the end of the fiscal period. He files a VAT returns file with the Tax Authority. He declares the VAT amount he paid (20 GBP at Customs), the VAT amount he collected so far (4 GBP x 6 units = 24) - The difference between VAT collected and VAT paid is 4 GBP. This amount must be paid to the tax authority

So as a Summary:

Company based in US and amazon account in UK: has to pay VAT in UK

Company based in US and amazon account in US: has to file sales tax in US

Company based in UK and amazon account in US: Has to Pay VAT in UK but Amazon collects sale tax on your behalf in USA and file accordingly (no action for you in USA)

You can read more about details here:
https://services.amazon.co.uk/service...

Hope this helps.
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