The UK officially withdrew from the European Union (EU) on 31st December 2020, triggering a vast array of tax and tariff changes across almost every industry. In the secondary software market, Brexit has caused a little confusion amongst resellers as to whether they face hidden shipping or tax costs. In this article, we’ve put together a helpful overview of the facts.

Q: Will UK-based secondary software suppliers face any hidden costs when invoicing EU customers, or vice versa?

A: No. If both entities are VAT registered, nothing will change. Businesses should continue to treat software licencing as a kind of service, placing it outside the remit of value-added tax (VAT).

For example, if you’re a UK-based supplier of used licences and want to invoice a German, Spanish, or French client, your invoice document should be issued without any VAT added.

Q: Will secondary software suppliers based in the EU face any hidden costs when invoicing business customers in other EU member states?

A: Again, the answer is no. Let’s say, for example, a secondary software supplier owns an entity based in a member state of the EU such as Spain and resells pre-owned licences to a client in another member state such as Germany. The location of supply is where the business will be considered an established entity. In this way, no VAT will need to be added to the sales invoice from the Spanish supplier to the German client.

It is worth noting, however, that the sale must still be recorded on a local EC Sales List and the business customer’s VAT number must be visible on the invoice issued by the Spanish supplier. The invoice legend must also state that the service is subject to reverse charge mechanisms.

Q: Should EU or UK-based suppliers charge VAT when invoicing business customers in the same country?

A: In both cases, suppliers must add VAT in accordance with local guidelines, regardless of the business status of the client.