For US Businesses, Everything About VAT/GST is Foreign
9 out of 10 countries around the world has a VAT/GST system. The US does not.
Value Added Tax (VAT) and Goods & Services Tax (GST) are transactional taxes. Unlike the US Sales Tax which is generally only charged to the end consumer at the final point of sale, VAT or GST may be levied at each step of the supply chain.
VAT/GST is employed by 90% of countries around the world, excluding the US. The current EU average VAT rate is 21.6%.
Whether a business is selling or buying goods or services or even just ships its own goods from one country to another for other purposes such as storage, distribution or clinical trials etc. VAT/GST may apply to the transactions.
Failure to register and account for VAT/GST may result in significant penalties, administrative hassle, and unwanted scrutiny by the local tax authorities.
Insufficient paperwork related to importation or exportation may result in goods being detained at the border, or rejected outright.
VAT/GST recovery for US businesses is often particularly complex and may pose an irrecoverable cost if relevant measures are not taken in due time.
Therefore, US businesses should generally confirm these two critical questions prior to engaging in any overseas transactions:
Is the business liable to register and account for VAT/GST abroad on any part of the supply chain?
Will the US business incur any VAT/GST costs relating to the transaction?
If you have any concerns or questions relating to your business transactions, we highly recommend that you discuss the matter with a global indirect tax (VAT/GST) specialist.