What determines if VAT is charged on overseas sales?

VAT on overseas sales is determined primarily by the destination principle, which is based on the location of the customer. Under this principle, the place of supply for goods or services—and consequently whether VAT is charged or at what rate—is assessed according to where the customer is located rather than where the supplier or seller operates from.

In practice, this means that if a business sells goods to a customer in another country, whether VAT is applied hinges on the customer's location. For instance, if a UK business sells goods to a customer in Europe, VAT may be charged according to the local VAT laws applicable to that customer's country, rather than UK VAT rules. Therefore, understanding the destination principle is key for correctly determining VAT obligations on international transactions.

In contrast, the seller's country of origin alone does not dictate whether VAT is applied, as international trade typically looks to the end-user location for tax application. Likewise, while the nature of the goods and their price could be relevant to specific VAT exemptions or rates within certain jurisdictions, they do not define whether VAT will be charged on international sales overall.