VAT charged by Alibaba and DDP
Hi All,
Needing some advice
I’m not registered for VAT as earn less than £85k threshold, however Alibaba are charging 20% tax on all of my orders which obviously eats into profits.
I make sure that DDP includes import and VAT and therefore it appears that I am paying the same tax twice! I cannot provide them with a VAT number and therefore Alibaba won’t exempt me.
Has anyone else come across this issue? Any advice?
0 replies
Seller_7VbclcPFFRTnc
You would pay vat on any supplies you buy from a vat registered seller
Not sure about the extra on DDP though
Not being vat registered yourself means that you are not collecting vat on any of your sales for HMRC
You’ll also pay vat on all your amazon seller fees so you need to bear that in mind when calculating profits too
Seller_qZO3ZCjoBXEeL
I am not completely clear what it is that you are doing? You are buying goods from Alibaba and having them shipped to you in the UK is that right? If VAT is being paid at the time of the transaction why are the items being sent DDP?
DDP is a shipment method where the SENDER is responsible for payment of any taxes and duties that are due for importation of the goods at the destination country. The courier acts as a broker and importer of record, pays the taxes and bills the sender.
Seller_2Su3bcJXQR0sO
This started late last year I believe. Lots of non VAT reg buyers are being charged VAT on Alibaba purchases. Go to the US forum or any other Facebook Amazon Sellers pages as search for the topic. Sorry, I don’t remember the reasoning behind it, but I questioned the legality of it all. Did China have trade agreement with the rest of the world regarding VAT collection? I doubt it. But contact Alibaba support chat, they. will be able to offer you an answer.
You can circumvent the 20% if suppliers agrees to work via PayPal. Just make sure all info and pictures are on the invoice. Paypal offers more protection than Alibaba will. I have been bitten various times on Alibaba, raised claims, but they always side with the supplier.
When you find a good and trusted supplier, just do direct bank transfers. It costs £25 per transaction, but your bank will give you better exchange rates than Alibaba.
Delivered Duty Paid (DDP) - sellers burden all the costs, import duty and taxes. You shouldn’t have to pay anything.
Seller_lhG3Y690i4Qj9
VAT is a “VALUE ADDED TAX” which you collect for HMRC and has absolutely nothing to do with eating in to profit as you claim back the VAT paid on the purchase.
DDP = “Delivered Duty Paid” this is the import duty charged (a totally different thing to VAT) on the goods entering the country.
Basically you buy goods and import them, you either have to pay DUTY yourself when they arrive and pass through customs or have them delivered DDP = “Delivered Duty Paid” where you pay the duty to the supplier. Either way, this is a direct cost added to each product.
You also pay VAT (Value Added Tax) on all purchases which if you are VAT registered you then claim back accordingly and if you are not VAT registered it is essentially a cost which would need to be added to each item.
When you then sell the goods if you are VAT registered, you pay HMRC the difference between what you paid in VAT buying the products (and lots of other expenses where VAT is charged) and what you collected for HMRC in VAT on the sale.
Basically if you are VAT registered:
You buy something for £1 (inc 17p vat) the net cost per item is 83p
You then sell it for £2 (inc 33p vat) you have collected from the sale for HMRC VAT (Value Added Tax) 33p but can claim back the 17p you paid buying the goods (plus all other costs which VAT is charged on such as postage, packaging, rent, Amazon fees etc etc) and would basically owe HMRC 16p (which is the difference between the VAT you paid buying the product and the VAT you charged selling it)
You have a Net profit of 84p
If you are not VAT registered.
You buy something for £1 (inc 0.17 vat) the net cost is £1
You then sell it for £2 and there is nothing to pay HMRC as you have already given them the 17p.
Your net profit is therefore £1 but you can not claim back all the other VAT you have paid on things such as postage, packaging, rent, Amazon fees etc etc
