VAT on digital purchase from the EU post Brexit

TRBob

I would like to purchase quite an expensive piece of software which is developed in Spain, at the moment I would have to pay VAT, however post Brexit I understand that as we will no longer be an EU country, it won't be necessary to pay the VAT, is this correct? It is a digital copy downloaded over the internet.

No political opinions please.

superbigal36

Why do you currently pay VAT ?
Services subject to the reverse charge rule (Article 44 of the EU VAT directive)
I assume this would cover you ?

Pennywise

Just because we may or may not Brexit, doesn't mean that we won't carry on with the same EU-wide VAT system. For example, the Isle of Man isn't part of the EU yet has adopted EU VAT. VAT may well just continue as it is today, which is what you need to assume until the situation is clarified.

TheCyclingProgrammer

Is this a B2B purchase or a B2C purchase? Is this an off-the-shelf piece of software?

Assuming it is and this is a B2C purchase then the Spanish supplier will be charging UK VAT under the VAT on digital services regime. Its impossible to say with any certainty whether or not the UK would continue to operate under this scheme post-Brexit. Certainly, if its during any transition period (if we get a deal) then I imagine they would continue do this. Longer term its possible that an EU supplier would treat supplies to the UK as they would to the rest of the world and would not need to charge VAT.

If this is a B2B purchase then as far as I can tell Brexit should have no effect on the VAT treatment - as long as the Spanish supplier accepts its a B2B purchase (strictly speaking you do not need to be VAT registered for it to be a B2B supply of services but you'll find most EU suppliers including Spanish ones will expect a UK VAT number to be supplied) then it will be outside the scope of Spanish VAT and subject to the reverse charge. Again, its hard to imagine how UK VAT rules will change overnight post-Brexit so I would expect this to remain the case.

If this is B2B but you're not VAT registered and the Spanish supplier therefore refuses to account for it as a B2B purchase then you will be liable to pay any Spanish VAT.

TRBob

Thank you for the quick replies everyone.

TheCyclingProgrammer, it is a B2C purchase for off-the-shelf software.
When going through to checkout if I say select that I am from the US then there is no VAT to pay.

nick74

The problem is that you're asking a question that no one can currently give a definitive answer to. Until the final details of Brexit are known then it is impossible to say.

TheCyclingProgrammer

TRBob wrote: »

Thank you for the quick replies everyone.

TheCyclingProgrammer, it is a B2C purchase for off-the-shelf software.
When going through to checkout if I say select that I am from the US then there is no VAT to pay.

In that case - the default position is that VAT on digital services only applies to countries in the EU. This is why no VAT is added if you select USA as your location.

However as I mentioned before, it's impossible to predict a) the terms under which we leave the EU (if we leave at all) and b) how any implementation/transition period would work in terms of VAT rules. My hunch is that we would align with EU VAT rules at least for the implementation period.

Nobody can say for sure.