Import VAT vs Domestic VAT
Compare import VAT and domestic VAT: when each applies, deferral schemes, and cash flow implications for cross-border sellers.
VAT Types
Import VAT
VAT charged at customs when goods enter the country. Based on customs value + duties + shipping. Can be deferred with PVA or IOSS.
Pros
- ✓PVA eliminates cash flow impact
- ✓IOSS simplifies low-value imports
- ✓Input VAT deductible
Cons
- ✗Cash flow impact without PVA
- ✗Must be registered to deduct
- ✗Complex valuation rules
- ✗Customs delays possible
Best for: Importing goods from non-EU/UK countries
Cost: Standard VAT rate on import value
Setup: Per shipment
Domestic VAT
VAT charged on domestic sales and services. Applied at point of sale. Standard accounting with input/output VAT offset.
Pros
- ✓No customs involvement
- ✓Simple invoicing
- ✓Regular payment cycle
Cons
- ✗Must be VAT registered
- ✗Filing obligations
- ✗Cash flow timing
Best for: Selling within a single country
Cost: Standard VAT rate on sale price
Setup: Ongoing
FAQ
What is Postponed VAT Accounting (PVA)?+
PVA allows businesses to account for import VAT on their VAT return instead of paying at customs. This eliminates cash flow impact. Available in UK since 2021 and many EU countries. No separate application needed.