Key Considerations for UK Retailers Exporting Beyond the EU

By Luca Clivati, Senior Consulting Manager at Sovos

Our first article looked at UK retailers exporting to the EU. Here, we look beyond the EU and focus on three key markets that could strategically make a big difference to turnover for UK retailers.

Let’s start with Switzerland, the European country with the highest per capita income (about USD 83,400 in 2022). It’s easy to reach from a logistics perspective and, with a population of about 9 million and about 73% of the population being ecommerce users, a country that can be easily included in your marketing strategy.

What about Australia? The UK was Australia’s fifth-largest goods trading partner in 2020. This relationship can only improve once the UK–Australia Free Trade Agreement (FTA) comes into force. As of today, businesses can benefit from the low Goods and Services Tax (GST) rate, and the simplification to trade with this important market.

Finally, considering New Zealand. As with Australia, the UK-New Zealand Free Trade Agreement (second trade deal to be negotiated from scratch since the UK left the EU) is not yet in force but we can already outline that UK Authorities estimate GBP 700 million increase in UK exports compared to 2019 levels. Reductions in tariffs and non-tariff measures are set to benefit businesses, notably UK’s manufacturers.

1. Export from the UK to the countries in scope: VAT/GST implications

When a UK retailer exports, the place of supply will be the place where the goods are delivered from.

On the UK side, the supplies will be subject to UK VAT and a zero rate should be applied, provided that certain conditions are fulfilled. For example:

Goods must be physically exported within specific time limits (currently three months); and
Evidence (either official or commercial) must be provided to prove entitlement to zero rating, again within specific time limits (currently three months).

In terms of evidence and customs documentation to support the VAT treatment, the UK retailer will need to collect, among other documents:

Official or commercial evidence of export using National Export System (NES) e.g. copy of Goods Departed Message (GDM) or screen print from Customs Handling of Import Export Freight (CHIEF) showing status codes;
Supplementary evidence of export transaction may also be needed.

In Switzerland, Australia, and New Zealand, duties (if applicable) and import VAT/GST might need to be paid on these imports. Throughout these countries, there are different ways to account for import VAT.

Generally, import VAT/GST is due at the point of import and can be recovered later via a local VAT/GST return (e.g. like the current system in the UK) provided there is a requirement to be VAT/GST registered.

However, like in the UK, these countries have implemented different schemes that impact your business and have pros and cons, which are detailed below.

Finally, we recall that an EORI number is essential for communicating with the UK customs authorities.

To export, the UK retailer will need a UK EORI number.

2. Case studies: The pros and cons of importing and trade in Switzerland, Australia and New Zealand as a non-resident retailer

Switzerland

Pros:

VAT rate: standard VAT rate is at7%
Import VAT:
We recommend all importers who regularly import goods into Switzerland open a ZAZ account, that allows payment deferment of customs fees and import VAT.

Advantages

Switzerland

Cashless customs assessment
Shorter waiting times at customs offices: Shipments are already released after acceptance of the relevant clearance application, and after a possible goods inspection
Payment deadline for VAT: 60 days
On request, you will receive an e-bill instead of a paper bill

Cons:

Threshold: A non-established business making any local supply of goods or services in Switzerland that are not subject to reverse charge in Switzerland becomes liable for Swiss VAT if its global turnover exceeds the CHF 100,000 (about GBP 89,900) threshold
Registrations of non-established businesses always require a fiscal representative
Distance sellers must register:
- In case they generate an annual turnover of at least CHF 100,000 from shipments falling under the low-value consignment relief (i.e. import of goods of low value that don’t trigger more than CHF 5 of import VAT)
- With an import license. This is normally done as part of the registration and is obligatory

Language barrier might apply

Australia

A non-established business must register for GST in Australia if both of the following apply:

They are carrying on a business or enterprise
and
Their GST turnover from sales connected with Australia is equal to, or greater than the registration turnover threshold of AUD 75,000 (about GBP 44,300). This threshold is calculated as:

Australia

Current turnover: which is the value of all supplies made or likely to be made in the current month plus the preceding 11 months
or
Projected turnover: which is the value of all supplies made or likely to be made in the current month plus the next 11 months

A registration is mandatory in case you are a non-resident business and:

You sell goods into Australia with a customs value of AUD 1,000 (about GBP 590) or less (low-value goods)
and
If the value of the above-mentioned supplies in aggregate exceeds the GST registration threshold of AUD 75,000 per annum

For consignments of goods imported over AUD 1,000, the registration is not mandatory, but any GST, customs duty, and clearance charges are charged to the importer at the border.

If your company is a non-resident business, you can choose from a simplified or standard GST registration.

Pros:

GST rate: standard GST rate is at 10%
Simplified GST registration:
Sales of goods with a Customs value of less than AUD 1,000 can be reported in Australia thanks to the “simplified GST registration” process, whereby non-resident taxpayers can register for GST and:

- Just report their GST on sales
- Are not required to issue invoices
- It doesn’t allow any GST input tax credits or GST refund
In general tax representatives aren’t required in Australia
No barrier from a language perspective

Cons:

Simplified GST registration isn’t available if a non-resident business:
- Imports goods and warehouses them in Australia before selling them online, directly, or through an electronic distribution platform. If so, the non-resident business will have a standard GST obligation for the goods sold because the goods are located in Australia. Instead, standard GST registration will allow the non-established business to meet their GST obligations and also allows them to claim GST credits incurred on the taxable importation of the goods
- Sells goods with a customs value of more than AUD 1,000. In this case, the supply will continue to be taxed at importation and a standard GST registration will be required under certain criteria
Standard GST registration requires a local public officer to be appointed

New Zealand

A non-established business must register for GST in New Zealand if both of the following apply:

They’re carrying on a business or enterprise
and
Their GST turnover from sales connected with New Zealand is equal to, or greater than, the registration turnover threshold of NZD 60,000 (about GBP 31,600). This threshold is calculated as:

- Current turnover: which is the value of all supplies made or likely to be made in the current month plus the preceding 11 months
  or
- Projected turnover: which is the value of all supplies made or likely to be made in the current month plus the next 11 months

Registration is mandatory in case you are a non-resident business and:

You sell goods into New Zealand with a customs value of NZD 1,000 (about GBP 527) or less (low-value goods)
and
If the value of the above-mentioned supplies in aggregate exceeds the GST registration threshold of NZD 60,000 per annum

For consignments of goods imported over NZD 1,000, the registration isn’t mandatory, but any GST, customs duty, and clearance charges are charged to the importer at the border.

Pros:

GST rate: standard GST rate is at 15%
In general, tax representatives aren’t required in New Zealand
No barrier from a language perspective
Your company may be able to claim GST back on goods or services you purchased if they are genuine business expenses
Invoices below NZD 1,000 aren’t required (your company can provide a receipt instead)

Cons:

Your company must issue sale invoices according to New Zealand rules, keep good records, and to return GST on a regular basis