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I just came across a .co.uk online store delivering goods all over the world. Even though I specify both billing and shipping address outside the EU (New Zealand), the site keeps applying 20% tax.

My current plan is to contact the store and see if they would stop applying tax before I place order, but I was wondering:

  1. Is it illegal for EU online stores to charge VAT for sales to customers outside the EU? If so, is there a regulator that an effective complaint could be filed with?
  2. If I go ahead placing order and get charged VAT, would there be a way to get it back, and how?
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    VAT for items exported outside the EU, I'm not sure if it is illegal to charge VAT, since really you are just collecting extra money for a tax payment. I don't believe there is any way to recover VAT from anybody other than the seller. – Ron Beyer May 9 '18 at 19:12
  • @RonBeyer IIRC tourists who show their non-EU passports may buy the item paying the VAT, and recover the VAT at their port of exit by showing the item. But that only works for shops that provide this service. That said, I would say the first step is just ask the store; maybe it is just that they have few non-EU customers and their site is not programmed to give the option. – SJuan76 May 9 '18 at 19:40
  • @RonBeyer I am pretty sure that the stores will not pay "tax" collected when they did not have to. In case of foreign customers they will just regard the "tax" as an addition to the price. – Greendrake May 10 '18 at 0:15
  • @Greendrake That would be a crime. Everything sold must be taxed; the exceptions apply when the seller can prove that the item ends up being exported (for example duty-free shops, and those register your passport data). In fact it would be way riskier pocketing online shopping VAT because there is a record of the money transfer. Ideally to do such a thing you would deal with final consumers (who do not fill VAT info records) who pay cash. – SJuan76 May 10 '18 at 14:30
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VAT is not due on goods shipped to a customer outside the EU, but there is nothing to stop a supplier from charging an 20% extra on exports. It doesn't sound like good business practice, but a small business making few exports outside the EU might think that the administrative burdens of handling the export exemption (including programming the website properly) were too much.

You can ask the supplier not to charge you VAT on the basis that it is a genuine export. If the supplier normally only ships goods to UK and other EU addresses (for which the rules are different), they might not have thought about true exports. However, beyond that your only real recourse would be to find a cheaper supplier.

If the supplier collected the 20% as VAT and paid it to HMRC (the UK tax authority), and later tried to reclaim it as VAT incorrectly collected, HMRC might to refuse the refund on the basis of unjust enrichment since you had already paid, but HMRC wouldn't be able to force the supplier to refund the 20% to you.

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