Learn how and where to find out what you need to know about VAT
for: artists and art teachers, art exhibition and competition organisers, museums and galleries, 

PLUS VAT on art supplied or sold by artists in UK and/or EU

VAT for Artists - Contents

Who needs to know about VAT?
​
ABOUT VAT
  • VAT Basics - What is VAT; VAT Tariff Rates
  • VAT on Art
  • VAT on exemptions
​
ABOUT VAT AND THE ART BUSINESS
  • artists' business activity
  • art education
  • art museums
  • commercial art galleries
  • online galleries
  • open exhibitions and art competitions
  • digital art services and digital art supplies
  • selling art supplies and art across borders 
  • distance selling of art
  • digital supplies and ecommerce platforms
Value Added Tax (VAT) is a topic of interest to:
  • professional artists living in the European Union (EU)
  • artists selling art online in the EU
  • anybody selling digital goods and services relating to art in the EU
  • Non-established taxable persons (e.g. international artists who do not live in the EU who are importing art for exhibitions in the EU);
  • art societies and competitions wanting to hold exhibitions involving international artists
  • galleries wanting to sell work by international artists in the UK and by UK artists to customers within the EU.
  • art schools charging for tuition and employing tutors
FACT: In the UK the VAT rate on art is 20% if
  • you are in business to sell art (e.g. a gallery or art dealer or an artist selling direct to the public)
  • your turnover (gross sales - not profit) in a rolling 12-month period exceeds the VAT threshold for mandatory registration and charging of VAT.
  • your business activities are within the scope of VAT irrespective of turnover e.g. sales of digital goods and services relating to art
This means that if you ever get your liability for VAT wrong you could find yourself with (1) a sizeable tax bill and (2) facing penalties.

Most leisure artists and those who are not successfully pursuing art as a professional full-time business are unlikely to be affected if their turnover or activities do NOT exceed the threshold for VAT registration.
FACT: Antiques, works of art or similar (as assets of historic houses) sold by private treaty to public collections are EXEMPT from VAT

Works of art which are private assets (i.e. not business assets) are outside the scope of VAT but only IF they are disposed of:
  • by private treaty sale, or disposed of in a way not involving a sale, to a specified public collection or other body and estate duty, capital transfer tax, inheritance tax or capital gains tax is not chargeable on the disposal
  • for acceptance in lieu of estate duty, capital transfer tax or inheritance tax
See VAT Notice 701/12
This page is a work in progress for the foreseeable future ​- VAT updates all the time!
HOWEVER I am not a VAT specialist and you MUST NOT assume I'm up to date with all the updates!

IMPORTANT DISCLAIMER

Those who need to know about VAT need to start somewhere.....

None of the information on this page is definitive, comprehensive or complete. 
None of the advice on this page should be treated as professional. 
Information and advice may also be out of date. 
That's because it's absolutely impossible to keep up with all the changes unless you are a qualified professional practitioner who is doing VAT full-time and there's no way I'm going to do that!  
However I do reference relevant government and EU guidance where I can - and official guidance is always a good place to start when checking any aspect of VAT. It also helps frame specific questions to professionals which can reduce fees due for advice given.
This page also references advice and guidance from one firm which does appear to know what it is talking about in relation to the EU regime in different countries and cross border sales- and I have found few equivalents. I'm not averse to hearing about more!

FIND OUT ABOUT VAT
​

What is Value Added Tax?
​

Value Added Tax (VAT) is a form of sales tax. 
​
VAT is a tax applicable to all goods and services in all countries within the European Union. It is applied in ways which are defined by both the EU and the government of individual countries in the EU.

IN SUMMARY - for artists:
  • IF your turnover of taxable supplies is over the VAT Threshold 
    • you MUST register for VAT; and 
    • you must charge VAT on art you sell (as a business) (see VAT Thresholds for direct sales and distance selling) 
    • you can then reclaim VAT on goods and services supplied to you
  • if your total business turnover does not exceed the VAT threshold  (i.e. you do not generate enough sales to register and do not have any other sources of income for your business) 
    • you do NOT need to register or charge VAT (which is why leisure artists don't charge VAT)
    • you cannot reclaim VAT on goods and services supplied to you
    • EXCEPT if you make digital supplies (see below)
  • If you sell digital goods and service (e.g. art instruction videos on DVD)  you must register for VAT in the EU countries where your customers live - and the threshold is zero (i.e. it applies to all sales)
  • If you must or opt to register for VAT, you can reclaim VAT charged and paid on the supplies you buy  

NOTE: Brexit may well change how all this applies to sales between the UK and EU Countries - but we don't know how as yet.

VAT in the UK: REFERENCE
​

REFERENCE: HM Revenue & Customs (UK) - FAQs and VAT Notices

How do I find out more about VAT?Why register for VAT?
Below you will find the relevant VAT Publication for frequently asked questions relating to VAT.

​What VAT records do I need to keep?​How do I get a refund?
REFERENCE: Other sources
 For a transaction to be subject to VAT three conditions must all be met:
1 The transaction must be a supply.
2 The supply must be made in the course or furtherance of a business activity.
3 It must not be an exempt supply.
​Tax issues for arts organisations made simple | Sayer Vincent

The VAT Registration Thresholds - in the UK
​

The Threshold relates to TURNOVER - that is gross sales of all VATable goods and services. It's not about profit and it applies even if you're not making a profit.
The threshold is based on your VAT taxable turnover - the total value of everything you sell or supply that isn’t VAT exempt.
Below are the turnover thresholds defined by the UK government for (1) mandatory registration for VAT from 1 April 2016.There are also thresholds for joining a VAT accounting scheme 

​REFERENCE: Government Publications

The VAT Registration Thresholds - in EU Countries

The VAT Registration Thresholds vary VERY SIGNIFICANTLY from country to country in the EU.

For example, the 2019 VAT registration annual thresholds for resident companies in....
  • France Goods €82,800; Services €33,200
  • Netherlands €NIL
  • Spain €NIL
  • Italy €65,000
  • Germany: €22,000
  • Ireland​: Goods €75,000 | Services €37,500

The VAT Thresholds for anybody selling art in a country they are not resident in may be completely different.
  • For example, if you sell art in France the threshold is NIL i.e. you need to be registered for VAT if a Non-French resident before you sell any.
​REFERENCE - EU Guidance
REFERENCE - EU Distance Selling Thresholds
REFERENCE - Ireland
  • VAT and Artists | Visual Artists Ireland Artists - this text is a simple guide to VAT general rules and administration. Professional advice is advised for all large sums.

The VAT Tariff Rate
​

The different VAT Rates

The tariff is the rate at which VAT is levied.
​
There are three different basic rates and then a class of exempt goods and service. The principle is that the default standard rate should always be charged unless approval has been given by the EU to vary it or the country has raised the standard rate above the default.
  • The Standard Rate - applied to most goods and services unless they are eligible for a reduced or zero rate. The default minimum rate across the EU is now 15%. In the UK the standard rate of VAT increased to 20% on 4 January 2011 (from 17.5%). ​
  • The Reduced Rate - applied to some goods and services where the case has been made for a reduction for the public good
  • The Zero Rate - reserved for defined essentials including books (but not digital ebooks)
  • Exempt - goods and services on which no VAT can be levied
  • Outside the scope - these are items on which VAT will not be levied
UK Example:
  • ​The standard rate of VAT on most goods and services in the UK is 20%. This is mandatory for all businesses selling art who are above the VAT threshold i.e. must be VAT registered
  • The VAT Rate on art IMPORTED into this country is 5%
  • The zero rate is reserved for essentials such as food and books (but NOT digital e-books).
  • Art can be exempt in specific circumstances - see VAT on Works of Art section below
REFERENCE: UK Government Guidance
  • VAT Rates - this is the government website which states the VAT rates
  • Businesses and charging VAT - the rates a business charges depends on the hature of the business and the goods and services produced (see Is an artist a business? below)
  • VAT rates on different goods and services - A government list of different goods and services showing which rates of VAT apply in the UK and which items are exempt or outside the scope of VAT. The VAT Rate on art IMPORTED into this country is 5%
Different VAT rates in different countries
​
The reality is that the VAT tax tariff rate - and what it is chargeable on - can vary from country to country within the European Union. 

The intention was that a single rate would be applicable across all countries. The notion was that harmonisation of tax regimes would make trade easier and enhance bonds between countries.

However some countries chose to have a lower standard rate and this has distorted the market eg Amazon is based in Luxembourg because its 3% tax rate on ebooks helped make Amazon prices very low across all the EU

In recent times the EU has been tackling issues of differentiation and trying to harmonise VAT across the EU e.g. the minimum standard rate of VAT is now 15% everywhere and matters relating to digital transactions are being brought into line.
REFERENCE: Government Guidance
EU Commission May 2016
REFERENCE: Other Advice

Validate a VAT Registration Number 
​

This is a SIMPLE VAT Checker: EU VAT number validation

VAT Fraud can involve companies which claim they are VAT registered - and charge VAT - but they are not.
Before conducting business with a new EU customer or supplier you should always verify their EU VAT number if they claim to be VAT registered.
​VAT Checker: EU VAT number validation | Avaleera

VAT on Works of Art
​

VAT on artwork and paintings - new and old
​

In general the presumption is that art is exempt (see box)..
​
UNLESS its supply is related to business activities when art is standard rated.
See sections BELOW relating to:
  • VAT and Artists' Business Activities
  • VAT and Commercial Art Galleries
  • VAT for Organisations holding art competitions, juried exhibitions 
  • etc

UNLESS art is imported - VAT is paid @5% on all art IMPORTED into the UK. VAT is payable at differing rates on imported art in other countries within the European Union.
see section BELOW relating to VAT - Cross-border supplies and sales of Art and Distance Selling of Art
EXEMPTION FROM VAT
​
Official Exemption from VAT on ART 
Sales of paintings which are not related to generating income as a business activity can mean that certain artworks are exempt from VAT:

​EXEMPT Art Disposals
  • Exempt VAT Notice 701/12 - Antiques, works of art or similar (as assets of historic houses) sold by private treaty to public collections
  • Exempt VAT Notice 701/12 - Antiques, works of art or similar (as assets of historic houses) used to settle a tax or estate duty debt with HM Revenue & Customs
ADVERT

VAT and Artists' Business Activities

Is an artist a business?
​

Artists are a business subject to VAT when they supply goods and services e.g. try to sell their art and earn an income from it

Artists may not regard their art as a product but that doesn't mean VAT is not charged on art in certain contexts

An artist is "a business" IF:
  • it is an occupation generally regarded as a trade, profession or vocations (i.e. Yes - an artist can be a business)
  • an artist's activities involve involve supplying goods (e.g. paintings) or services (e.g. commercial advice) for money. This definition should include most artists - even if their supply is irregular and/or 'not for profit'.

ONLY those pursuing their art entirely as a leisure pursuit and/or making no sales have no cause for concern about VAT.
REFERENCE:
  • Artquest | Vexing Art Toll - discusses how VAT applies to artists - however this is a seriously old article
Do I supply 'goods and/or services'?
Supplies include sales, free gifts, loans, barters, exchange of services (but not given free of charge) made in the course of a 'business'. Artworks, art books and publications, lectures on or about art given for profit, will all be supplies for VAT purposes.
Vexing Art Toll | Artquest
EXEMPT FROM VAT
  • Earnings from the Artist's Resale Right
The Artist’s Resale Right is exempt from VAT, so there are no VAT consequences of receiving a resale royalty. Any resale royalties you receive should not be included on your VAT return.
DACS | FAQs

​Calculate VAT taxable turnover
​

You must register for VAT if:
- you expect your VAT taxable turnover to be more than £85,000 in the next 30-day period
- your business had a VAT taxable turnover of more than £85,000 over the last 12 months
VAT Registration | HMRC
It is COMPULSORY to register for VAT when gross turnover exceeds the VAT Threshold for registration. 

​Below is the precise wording of government advice on how to calculate your taxable turnover. Goods and services in this context relate to your business activities as an artist (see above)

To check if you’ve gone over the threshold in any 12-month period,
add together the total value of your UK sales that are not VAT exempt, including: Include any zero-rated items - only exclude VAT-exempt sales, and goods or services you supply outside of the UK.
VAT Registration in UK (2019) 
​THRESHOLD: More than £85,000
​
Registration for distance selling into the UK - THRESHOLD: More than £70,000
​
Late registration
If you register late, you must pay what you owe from when you should have registered.
​
You may get a penalty depending on how much you owe and how late your registration is

​REFERENCE - VAT REGISTRATION:

Making Tax Digital - VAT in UK
​

All business who taxable turnover in excess of the VAT threshold
MUST comply with the mandatory requirement for DIGITAL REPORTING from 1st April 2019
​
VAT registered businesses with taxable turnover above the VAT registration threshold need to keep digital records and submit VAT Returns to HMRC using compatible software.

This applies to all art businesses registered for VAT. 

​HRMC’s Making Tax Digital for VAT requirements from 1st April 2019 are that VAT registered businesses
  • need to adapt to new digital recording obligations
  • must meet specific requirements to file on the new API platform
  • must meet deadlines
  • will be fined if they do not comply

HMRC Advice covers
1. Introduction
2. Check if you have to follow the Making Tax Digital rules
3. Exemption from Making Tax Digital
4. Digital record-keeping
5. Voluntary updates
6. Supplementary data
7. Agents
8. Examples of where a ‘digital link’ is required
9. Your rights and obligations
10. If you have a question about VAT, excise or customs duty
11. Putting things right
How HMRC uses your information

You can apply for an exemption if there are specific systems reasons why this cannot happen by the due date (i.e. you've neglected to read the VAT Notices and get this sorted is not a valid reason)
REFERENCE: OFFICIAL HMRC NOTICES AND GUIDANCE 
OTHER REFERENCES:

VAT Margin Schemes - Art
​

Most items normally described as ‘works of art’ are eligible. There are some exceptions, eg technical drawings, scenery for theatres and hand-decorated manufactured items.
VAT Margin Schemes: Eligibility
You can use a VAT Margin Scheme
  • if your GROSS TURNOVER (i.e. sales not profit) normally exceeds £79,000 (i.e. the threshold for VAT registration)
AND
  • You are eligible to use the Margin Scheme. VAT Margin Schemes are available to those who sell second-hand goods, works of art, antiques or collectibles on which no VAT was paid when you bought them. Hence there is no VAT to reclaim.
  • you account for VAT via A VAT Margin Scheme by charging the standard rate only on the difference between the price paid for an item and the price at which you sell it i.e. the margin. If you don't make a profit you don't pay any VAT.
  • However, standard VAT accounting must be used for all other sales and purchases such as overheads.
REFERENCE:

VAT on Art Education - eligible bodies and business activities
​

Education is exempt if it is supplied by an eligible body. VATEDU39000 gives guidance on the types of organisation that are eligible bodies for the purpose of the VAT Act 1994, Schedule 9, Group 6. You need to know whether a body qualifies as an eligible body before you can go on to establish the liability of the supplies it makes.
​
The critical issues are
  • whether or not art education is provided by an eligible body and
  • whether or not the activity is related to a business - even if the body is eligible
VAT should be charged on
  • the supply of teachers employed by Art Schools which are NOT designated as eligible bodies
  • all supplies that are not closely related and/or used in courses by eligible bodies

​In broad terms, establishments that don't normally charge for providing education are NOT a business activity and therefore are usually an eligible body.

Eligible bodies which charge for courses for overseas students or students over the age of 19 must charge VAT on those courses
EXEMPT FROM VAT - specific Education activities. These include:
  • Art education courses delivered by ‘eligible bodies’ (but not teachers employed by an Art School unless ‘eligible’)
  • Private art tuition – including any delivered online
Eligible bodies are:
A supply of education takes place where it is provided by way of business and in return for a consideration. For example, a fee-paying school makes supplies of education.
  1. VATEDU26000
The guidance given in VATEDU26000, VATEDU26500, VATEDU27000 and VATEDU27500 will help you to decide whether the particular organisation is making supplies of education in the course or furtherance of business.

VAT on Art Societies ("Clubs and Associations")
and membership subscriptions
​

Which activities are business activities for VAT purposes
Business activities include:
- providing benefits to members in return for membership subscriptions 
- providing benefits to members in return for a separate charge
- making supplies to non-members for a charge
- admission to any premises for a charge
- providing catering, social and other facilities to non-members in return for a charge
​HMRC | Guidance: Clubs and associations' VAT responsibilities (VAT Notice 701/5) ​
​Professional associations
A professional association is a body which restricts its membership wholly or mainly to those who hold or are seeking a recognised qualification from it. Membership of the association must be obligatory, or at least customary, for those pursuing a career in that profession.
Clubs and associations' VAT responsibilities (VAT Notice 701/5)
If an organisation provides facilities or advantages to its members in return for a subscription or other consideration, the provision of membership supplies is deemed to be a business activity by section 94(2)(a) of the VAT Act 1994. See VBNB24000.
A critical issue for art societies is what sort of entity they are in legal terms. and how they frame benefits to members. ​The UK Government makes a distinction between:
  • those organisations (e.g. clubs and associations) where making membership supplies is deemed a business activity 
  • those which do not have a business activity.
HMRC currently test whether or not a "not for profit" organisation is “in business” on a case-by-case basis. 
MEMBERSHIP SUBSCRIPTIONS

Membership subscriptions can be treated in different ways for VAT. They can be: 
  • Exempt 
  • Non-business (outside the scope of VAT) 
  • Taxable i.e. subject to standard or zero rat VAT 
  • A mixture of some or all of the above

Subscriptions will be standard rated unless they satisfy the conditions of the exemption.

Subscriptions that can be treated as VAT exempt include those charged by professional bodies, learned societies, trade unions, political parties and philanthropic organisations. 

​This can include "an association, the primary purpose of which is the advancement of a particular branch of knowledge, or the fostering of professional expertise, connected with the past or present professions or employments of its members." (Value Added Tax Act 1994)-

​HOWEVER this raises the issue of the PROFESSIONAL (past and present) occupations of the members paying the subscriptions.  Hobby artists would appear NOT to qualify.
By and large art societies in the UK are NOT "Approved professional organisations and learned societies"
  • although a number of leading societies are charitable non-business organisations and hence exempt in relation to their charitable activities
  • but NOT in relation to any trading / business activities they engage in. (Charitable bodies usually set up separate trading companies for this purpose - which then transfer profits to the charity)
The membership subscription is exempt from VAT, but with certain exclusions that are always standard-rated.
The following are excluded from the exemption: 
- Any supplies that are not referable to the aims of the organisation as set out in its rules, articles of association, constitution etc; 
 - The right of admission to any premises, event or performance (for example a conference) for which non-members have to pay; 
- Any supplies that are not available without payment other than a membership subscription, that is, which are not provided automatically as part of the membership benefits and for which an additional sum is charged.
​Tax exemptions for membership organisations - are you taking advantage of them? (2012)
REFERENCE: OFFICIAL HMRC GUIDANCE ​REFERENCE - Chartered Accountants / expert advisers

VAT re. Charities and Not for Profit Organisations
​

Is a NFP organisation “in business” for VAT purposes? Deciding whether or not your NFP organisation is “in business” is critical to determining the VAT status of any income generated and the entitlement to deduct VAT on costs associated with this income. Such income could arise in the context of trading, fund raising or investment activities of your organisation. 
Charities don’t pay VAT when buying some goods and services.

However a charity must register for VAT with HM Revenue and Customs (HMRC) if VAT taxable turnover is more than £85,000.

SEE VAT for Charities (re UK)
  1. Overview
  2. What qualifies for VAT relief
  3. How to claim VAT relief
  4. Charities and VAT registration​
REFERENCE - HMRC Publications REFERENCE - UK Charities REFERENCE - Irish Tax Manual | Irish Tax and Customs ​REFERENCE - Chartered Accountants / expert advisers
In general, many of the activities carried out by Charities are considered to be either outside the scope of or exempt from, VAT. Charities engaged exclusively in such activities are neither obliged nor entitled to register and account for VAT on their income. In certain circumstances the activities of a charity may be considered to be in competition with commercial traders and the charity may then be required to register and account for VAT on these activities.
Vat and Charities | Irish Tax and Customs (PDF)

VAT and Art Museums
​

Admission Charges

EXEMPT from VAT:  Admission charges by public authorities or eligible cultural bodies to certain cultural events such as visits to museums, art exhibitions, zoos and performances. 

How VAT applies to Museums and Galleries depends on:
  • whether or not the cultural body is defined as eligible (there is a list!)
  • whether they are national museums or galleries that make no charges for entry and that are eligible for refunds under the VAT Refund Scheme
  • the extent to which activities are categorised under business, educational or charitable purposes.
All business activities by museums and art galleries and public bodies are always vatable.
OFFICIAL VAT NOTICES (UK)
ADVERT

VAT and art auctions
​

VAT can vary when charged at auctions depending on:
  • whether the art is imported
  • whether the dealer operates the Dealers Margin Scheme or not
  • whether there is VAT charged on online live auctions
OFFICIAL VAT NOTICES (UK)
  • VAT Notice 718/2: the auctioneers' scheme - This notice is about the Auctioneers’ Scheme, which is a variation on the VAT Margin Scheme for second-hand goods, antiques, works of art and collectors’ items. It tells you when you may use the Auctioneers’ Scheme to account for VAT on the supplies you make.
REFERENCE:

VAT and Commercial Art Galleries
​

VAT on artwork in Gallery Exhibitions and Gallery Sales
​

One aspect of VAT which many artists find confusing is how VAT applies to works sold via a gallery. 

Problems arise because
  • Either Galleries and/or the artist do NOT understand VAT (never ever assume a gallery understands VAT)
  • and/or don't understand what can be done to reduce the VAT bill and increase the net benefit for artists.

Galleries by the very nature are in the business of showing and selling art - therefore VAT is applicable
  • A commercial art gallery or a gallery selling art should be registered for VAT (i.e. if if they are a viable business they should be meeting the registration threshold for turnover).
  • This means all artwork sold via the gallery MUST have VAT added to the price.

Questions about VAT tend to revolve around whether the Gallery is
  • EITHER acting on behalf of the Principal (the artist) - The Gallery can act in the name of its principal i.e. the artist (as a disclosed agent)
  • OR as an undisclosed Agent (of the artist) - The Gallery as an Agent can act in its own name (as an undisclosed agent) .
The VAT treatment of the sales depends on the type of agency applying as described in HMRC’sVAT Notice 700: The VAT Guide at sections
  • 22.5 (disclosed agent) and 
  • 22.6 (undisclosed agent).
BEFORE entering into a contractual agreement with a gallery

​If an artist is entering into a contractual relationship with a Gallery the artist is recommended to
  • get the Gallery to put in writing to the artist EXACTLY how the VAT is dealt with. (eg worked example)
  • this creates a record in the event of any dispute.
  • plus it provides a written statement that can be checked out independently with somebody who knows how VAT is supposed to work in Galleries (for example HMRC).
REFERENCE: Other Articles
  • Is there a VAT liability when a gallery sells art on behalf of the artist? | Taxation (December 2014) - This relates to an artist renting space from a commercial VAT registered art gallery.
    • The gallery does not purchase the artist’s work and is acting as her agent for the sales to the customers.
    • The artist paid VAT on the rent but did not intend for VAT to be added to the sale of the artwork
  • Taxation - VAT on Paintings A Q&A article about how VAT should be charged and may be avoided.
  • VAT Revisited | ArtQuest - this covers
    • 'When should galleries charge VAT on sales?' and
    • 'When should galleries not charge VAT on sales?' and
    • 'What happens if the gallery gets it wrong?'
  • VAT on paintings | Taxation Newsletter (7 November 2012) - comments on the vagaries of who owns a painting when an artist sells via a gallery and who has to raise VAT on what

VAT on Exhibitions and Art Fairs
​

Artists and organisers of art exhibitions need to be careful about
  • deemed business services relating to exhibitions and art fairs
  • admission charges to exhibitions and whether or not they count for VAT or can be exempted or be charged at a reduced rate.
REFERENCE:
  • Admission charges to cultural events (VAT Notice 701/47) | HMRC - This notice explains when admission charges to certain cultural exhibitions and events can be exempted from VAT, and by whom. It also covers the exemption of fund raising events by certain cultural bodies.
  • Events, Exhibitions and Conferences - Admission to events, exhibitions and conferences in the EU is subject to VAT in the country where the event takes place.. Relevant business services are admission, stand rental and catering services.

VAT and Online Galleries
​

The situation of online galleries will revolve around:
  • whether or not they meet the VAT registration threshold on the basis of their annual turnover.
  • whether the online gallery acts as Principal or Agent for any sale
  • whether the artists are registered for VAT
  • whether they are using a VAT Margin Scheme - see above
REFERENCE: 
  • VAT for (Online) Galleries | UK Business Forums - note that this is a Forum Q&A which means it is not definitive - but also that the person asking the question has had conflicting advice from HMRC. The question revolves around the galleries role as Principal or Agent (i.e. they don't see the artwork but they do handle the sale)

VAT
​re. Cross-border supplies and sales of Art
and Distance Selling of Art
​

From 1 December 2012, if you make any taxable supplies in the UK, you must register for VAT here, and account for any UK VAT to HMRC.
If you supply or sell art and trade across borders you will want to avoid major tax bills and fines for not following the relevant rules on VAT.
This affects:
  • artists living outside the EU who want to exhibit and sell their art in countries the EU
  • all artists selling to buyers based in the EU
  • galleries showing/selling art by Non-established taxable persons (e.g. international artists who do not live in the EU who are importing art for exhibitions in the EU);
  • galleries selling to buyers living in the EU and/or other countries
  • those living outside the EU and paying VAT on art bought in the EU
You need to:
  • be registered in all countries where VAT registration is relevant to your business activities
  • find out about proof to keep and forms to complete.
  • ensure you complete all VAT returns accurately for all relevant countries in line with reporting deadlines
  • be mindful of all the various distance selling thresholds for business that is not conducted face to face and how these apply to cross-border sales
PLACE OF SUPPLY

​The crucial issue is the place of supply principle.

What ‘place of supply’ means
The place of supply is the place where a supply is made and where VAT may be charged and paid.

With services, deciding the place of supply can be complicated. There are various rules that apply, depending on:
- whether you have more than 1 business location
- the kind of service you provide
- the place where your business or your business customer ‘belongs’

Definition of 'Place of Supply' | VAT: how to work out your place of supply of services
REFERENCE: Government Guidance
​REFERENCE: EU Guidance
REFERENCE: Professional advice on VAT and cross-border sales
​
DISCLAIMER: Various people will purport to offer advice. You need to get references and/or check out all advisers if you intend to seek and pay for advice. What follows is for information only and does not constitute a recommendation

Distance Selling
​

Distance selling is the term used to describes supplies of goods from one Member State to a person in another Member State where

  • - the customer is not registered for VAT, and
  • - the supplier is responsible for delivery of the goods.
The recipients of distance sales will mainly be private individuals, but they can also include small unregistered businesses, businesses making only exempt supplies, charities and public bodies.

​Definition of Distance Selling | VAT Place of Supply (Goods)
DISTANCE SELLING - ACROSS BORDERS

In addition, if trade is done through distance selling (e-Commerce) then the (lower) Distance Selling VAT Registration Thresholds apply - which are usually different and lower than normal VAT Thresholds.

If the distance selling relates to digital goods and services relating to art then 
  • the VAT threshold is ZERO 
  • AND you have to register for VAT in the place where the customer lives (See VAT and Digital Supplies)
​
GEO-BLOCKING - FUTURE CHANGE IN THE EU

​In May 2016, the EU made a number of proposals about how it was going to tackle e-commerce within the EU and methods used for geo-blocking of transactions between different countries
REFERENCE: Other Articles

VAT for Organisations, Exhibitions & Competitions
​

If you are a Non-Established Taxable Person (NETP), you must register for VAT in the UK and start to charge VAT if you make any taxable supplies here. For further information on NETPs see paragraph 6.2.3.
VAT Notice 700 -  The VAT Guide
OPEN EXHIBITIONS AND ART COMPETITIONS

Organisers of open exhibitions and art competitions accepting entries from artists who do not live or work in the country hosting the exhibition need to be fully conversant with the workings of VAT in relation to:
  • import of art
  • sale of art

[ NOTE: I THINK this applies irrespective of their status in relation to other matters relating to VAT. If in doubt seek professional advice. ]
 
VAT arrangements for those sending artwork to the UK for exhibition or a competition changed in December 2012

Those international artists defined as a Non-Established Taxable Person (NETP) now have to register for VAT and charge VAT if they make any supplies here.

This in turn changed the arrangements made by competition organisers for artwork received from international artists (people who don't live or work here for tax purposes) for exhibitions or art competitions.
REFERENCE:

​VAT Information (International Artists) (PDF) - notes for artists applying to exhibit at the Summer Exhibition of the Royal Academy of Art
VAT for non-UK artists and UK exhibition organisers | Making A Mark - This post provides an introduction to recent changes in Value Added Tax and VAT registration for both 
  • artists living outside the UK who want to exhibit and sell their art in the UK; and 
  • those selling art by overseas artists in the UK i.e. the managers of art galleries and art fairs, the Executive Committees of Art Societies and the organisers of Art Competitions.
If you are not normally resident in the UK, you must have a UK VAT registration number before your work(s) can be submitted. You must provide your UK VAT number when you submit.
REFERENCE: Non-Established Taxable Person (NETP) and/or refunds - Government Guidance

VAT and Digital Art Services and Art Supplies
​

THIS SECTION IS CURRENTLY BEING REVISED

DUE TO THE SCRAPPING OF
​VAT ON DIGITAL PUBLICATIONS
​ON 1 MAY 2020
​
Note: This is a very brief summary and will be expanded in future to clarify further what the implications of the change in rules are. ​See some of the official publications above.

Recently EU governments have expressed concern about multinational companies that choose to locate in specific countries so as to avoid paying tax on their trading in other EU countries. 
As a result changes were made to the VAT rules - and were implemented in the UK on 1 January 2015. 

This section considers key points followed by references to documents published by H.M. Revenue & Customs and articles and other publications providing information and advice
For UK businesses making cross-border supplies where the place of supply is another EU member state, there is no registration threshold and VAT is charged at the rate due in the consumer’s country.
Register for the VAT Mini One Stop Shop scheme
KEY POINTS:

All products supplied digitally (e.g. e-books, digital images; digital magazines ) are:
  • now rated for VAT based on the place of consumption (i.e. where the buyer lives) 
  • NOT on the place of supply (i.e. where the retailer is located for tax purposes). 
​
This now means that ALL retailers of digital products have to register for tax in all the countries that they supply to - irrespective of whether or not they meet the threshold for VAT in this country.  Unless they can find a third party to deal through who will also deal with all the VAT.

Guidance on what you need to consider when deciding whether your activity is ‘business’ is in the VAT Business/Non-Business Manual.

VAT chargeable Services within the European Union definition include the following:
  • E-books (e.g. Amazon Kindle)
  • Download and streaming videos
  • Cloud computing, including software provided as a service (‘SaaS’)
  • Streaming television
  • Broadcast television and radio
electronic supplies and digital services
Some may be surprised by what is and is not deemed a digital service - and therefore vattable (Source: VAT rules for supplies of digital services to consumers in the EU)
If your business turnover is below the UK VAT threshold
If you’re in business but your turnover is below the UK VAT threshold you’ll need to:
  • register for VAT before you can register for Union VAT MOSS
  • enter ‘Digital Services’ and select ‘Supplies of Digital Services (below UK VAT threshold) under VAT MOSS arrangements’ - when asked to search for a business activity as part of VAT registration
If you only register for UK VAT so you can use the VAT MOSS scheme, you’ll only need to submit nil VAT Returns.

​How does VAT apply to digital goods and services?
VAT: supplying digital services to private consumers (129 December 2014 | updated March 2015) - Changes to the place of supply rules for digital services
  • See also the section later on this page
What's the VAT Mini One-Stop Shop?
​NOTE: From 1st Jan 2015 registration to the VAT ON E-SERVICES site was suspended
Sales not affected by these rules
Using the internet, or some electronic means of communication, just to communicate or facilitate trading does not always mean that a business is supplying e-services. Using the internet for the following does not count:
- supplies of goods, where the order and processing is done electronically
- supplies of physical books, newsletters, newspapers or journals
- services of lawyers and financial consultants who advise clients through email
- booking services or tickets to entertainment events, hotel accommodation or car hire
- educational or professional courses, where the content is delivered by a teacher over the internet or an electronic - - network (in other words, using a remote link)
- offline physical repair services of computer equipment
- advertising services in newspapers, on posters and on television
VAT rules for supplies of digital services to consumers in the EU

REFERENCE: Digital Supplies and HMRC Publications
​

Unless you sell digital services entirely through digital platforms or marketplaces, who take on responsibility for accounting for the VAT due, you must consider how you intend to account for VAT on supplies of digital services to consumers.
VAT rules for supplies of digital services to consumers in the EU
VAT on Digital Services in the EU - The history of updates is as follows:
  • 19 November 2018 - The guidance has been updated with new information about invoicing, leaving the scheme and which VAT MOSS Return to use to declare VAT.
  • 16 January 2018 - This guidance now includes a 'Get help' section.
  • 12 April 2016 - Updates to the content under the VAT groups heading.
  • 18 January 2016 - Small amendments to content under the 'Overview' and 'If your business turnover is below the UK VAT threshold' headings. This is to clarify that some people may not be classed as being 'in business' for the purposes of VAT MOSS.
  • 11 June 2015 - Updated to incorporate information about correcting VAT MOSS returns.
  • 20 March 2015 - How to complete VAT MOSS Returns and how to pay VAT MOSS bill.
  • 19 December 2014 - This guidance has been updated to incorporate information for micro businesses interested in registering for VAT MOSS.
  • 1 October 2014 - First published.

VAT on sales of digital services in the EU (VAT MOSS) Published 1 February 2016
​This collection brings together guidance and forms about VAT on the supply of digital services and the VAT Mini One Stop Shop (VAT MOSS).
Contents
  1. VAT MOSS rules and guidance
  2. VAT MOSS Returns
  3. HMRC Online Services
  4. Exchange rates

Register for the VAT Mini One Stop Shop scheme Published 1 October 2014 | Last updated 19 November 201 - 
CONTENTS
  1. Overview
  2. How the VAT MOSS scheme works
  3. How to register
  4. If you want to leave the scheme
  5. VAT MOSS Returns
  6. How to pay your VAT MOSS bill
  7. Records you need to keep
  8. How to reclaim VAT on business expenses and purchases
  9. Audit and penalties
  10. Get help

Guidance - VAT: businesses supplying digital services to private consumers - Published 19 December 2014 | Last updated 19 November 2018
This explains the changes to the place of supply rules for digital services
​CONTENTS
  1. How to determine the place of supply and taxation
  2. Businesses established in the UK
  3. Businesses established outside the EU
  4. VAT accounting options for UK businesses supplying digital services to consumers
  5. VAT accounting options for non-EU businesses supplying digital services to EU consumers
  6. Defining digital services
  7. Sales not affected by these rules
  8. Defining ‘electronically supplied’
  9. Bundled or multiple supplies
  10. How to determine whether the customer is in business (a taxable person) or is a private consumer
  11. How to determine the location of the consumer
  12. Support for VAT MOSS registered micro-businesses
  13. Place of supply of educational services
  14. VAT rates and obligations in other EU member states
  15. Digital portals, platforms, gateways and marketplaces

REFERENCE: Digital Supplies and eCommerce Platforms
​

It's in the interests of ecommerce platforms to make it easy for clients to deal with the digital product VAT changes - and some have.

Bottom line - if the e-commerce platforms are to keep their customers they need to ensure that those using their service can be compliant with the rules for charging VAT for digital products sold in the EU

That's not to say all are - and you need to check this!

If you're selling digital goods to customers in the EU, you should charge VAT based on your customers' locations.

It's your responsibility to make sure that you comply fully with tax laws wherever your business operates. You should familiarize yourself with EU VAT rules as they apply to you.
Shopify

REFERENCE: VAT Advice from E-commerce sites

Here's what they have to say on the topic:
Etsy
  • How VAT works on Etsy
  • Digital VAT on Etsy - Etsy provides a simple way to collect and remit digital VAT from customers in different countries. Cites examples of digital products - E-books; Digital patterns; Downloadable PDFs
Shopify
  • Shopify: Charging VAT in the EU for digital goods - Useful summary of how the VAT rules apply and how to use the Shopify site to ensure compliance. Shopify is software used by independent retailers to set up an  e-commerce shop on their websites to process online sales, manage inventory/product listings and process payments
Create
  • Create: EU Digital Services VAT FAQ The 2015 change to legislation only affects sellers whose customers purchase digital products or services within the EU. Create users who have the 'Downloadable Products' facility enabled on their account and are actively selling digital products must observe these laws.
  • Create: How To Comply With 'EU Digital Services VAT' Rules - Create offer a FREE feature within your account to calculate the customer’s VAT rate based upon their resident state for all digital products (downloadable products). 

REFERENCE: Advice from accountants & tax advisors

  • Ernst and Young: Overview of EU VAT changes for digital products and
    services in 2015     - (pdf) - a campaign brochure for the services of a leading accountancy firm provides clearly structured advice to suppliers of digital goods anywhere in the world
  • Digitalising VAT | Tax Adviser Magazine (1 October 2015) - The completion of the digital single market is cited as one of 10 political priorities for the European Commission. Within its strategy to achieve this, announced on 6 May, three core strands have been identified

REFERENCE: Other sources of advice and information about VAT, digital products and place of supply

GO TO:
DISCLAIMER
  • I'm not a professionally qualified expert in this area.
  • However everybody has to start somewhere and the aim of this website is to get you thinking about the right questions to think about and ask if and when you need to get professional advice.
  • The links contained on this website are those which could be found by anybody doing extensive research on the Internet. This is your shortcut to the hours it took me to put this site together!
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