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When reselling goods from EU, how do I calculate profits, margins and tax due as self-employed in the UK, without overpaying on tax twice? As an example, I purchase a sofa from Portugal at gross 984 euro, I'd like to resell at 1200 pounds. That suggests that I've already paid 184 euros and as self-employed, I would be liable to pay 200 pounds in taxes. Is this the correct way to approach this or is there an alternative to correctly calculate.

Example (Portugal Tax@23%):

Sofa Net: €800

Sofa Gross: €984

Resell (UK@20%):

Sofa Net: £1000

Sofa Gross: £1200

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  • If you give your Portuguese supplier your VAT ID the reverse-charge mechanism applies and they won't charge you any VAT – you are responsible for sorting out VAT with HMRC at your local rate.
    – amon
    Commented Mar 22, 2020 at 21:25
  • Please not this is not "personal" finance question. gov.uk/starting-to-import/moving-goods-from-eu-countries
    – SZCZERZO KŁY
    Commented Mar 23, 2020 at 12:01

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Generally the VAT you do pay to suppliers is deductable from the VAT you get. Problems are cross country because getting that back requires paperwork. And time.

Which is why it is standard in B2B transactions to NOT pay the VAT on the country of origin - which is called "reverse charge". They get your VAT ID, they check it against the EU database and validate it, they send you the good without charging you VAT. Obviously you still collect VAT from your sales, and as you have no VAT to deduct, it all goes into your local VAT payment.

In your above example you would get the sofa for 800€ (net price, no VAT added) and sell it for 1000 pounds net. The difference is your profit. VAT is passed on to the UK tax authorities. Note that there is no sales VAT you pay in Portugal.

WITHOUT reverse charge:

  • You pay €984
  • The portugese tax authorities, upon export, owe you €184 VAT you paid, which you will have to reclaim.
  • You sell for for 1000 pounds, the collected VAT goes to the UK tax authorities.

Now, getting back the prepaid VAT is your problem. This is not double taxation as you have a legal right to get it back, but... for €184 it is NOT worth it. And for anything sensible in size - there is no reason to pay it in the first place, thanks to reverse charge.

If you insist on reclaiming, then https://europa.eu/youreurope/business/taxation/vat/vat-refunds/index_en.htm is the page you need to help you with the reclaim process.

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  • "€184 it is NOT worth it" I'm not so sure. I once tried with Spanish VAT (in a case where reverse charge wasn't applicable), and it took me about 10 min to submit (which I could do via in my case a German website) and then another 15 - 20 min to answer one additional question they had. Few weeks later, first an email and then the money arrived. Not sure whether sofa resellers can usually count on making (or avoiding a loss of) 300 €/h...
    – cbeleites
    Commented Mar 23, 2020 at 23:18
  • Ok, then they changed a lot. Last time I checked that it was - horrendous. Some days of paperwork.
    – TomTom
    Commented Mar 24, 2020 at 2:06

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