Yes, Value Added Tax (VAT) or Goods and Services Tax (GST) applies to most services, as it is a consumption tax levied on the value added at each stage of production and distribution. It is broadly applied to services—including digital, professional, and consulting—in over 170 countries, generally collected by businesses from consumers.
The Value Added Tax (VAT) or Goods and Services Tax (GST) are broadly based consumption tax assessed on the value added to goods and services. It applies to all goods and services that are bought and sold for use or consumption in foreign tax jurisdiction.
VAT is therefore, charged at each stage of the production and distribution process and it is proportional to the price charged for the goods and services. VAT is also payable on the importation of goods and on imported services.
VAT is charged on things like: goods and services (a service is anything other than supplying goods)
Under the general rule, if your UK business is providing services to the US and the place of supply is the US, then this transaction will be outside the scope of VAT. You will not need to charge VAT and can mark this on box 6 of your VAT return.
If you're a US-based company selling physical goods to other countries, you're very likely to have to deal with VAT. These rules and thresholds vary country by country, so it's important you check each country's VAT requirements before doing business there.
Examples of VAT exempt goods and services
VAT applies to practically all sales of services and imports, as well as to the sale, barter, exchange, or lease of goods or properties (tangible or intangible). The tax is equivalent to a uniform rate of 12%, based on the gross selling price of goods or properties sold, or gross receipts from the sale of services.
If the products or services are subject to the 20% standard rate of VAT: You must add 20% to the price you charge for the goods or service. You can do this by multiplying the price you charge by 1.2.
1. Do all professional services attract VAT in the UK? No. Most professional services are subject to the 20% standard rate, but some may be exempt (e.g., financial services, medical consultancy, education and training in specific cases).
Voluntary service charges mean that if a service charge is included in your bill payment, this charge is not included in VAT. On the contrary discretionary charge is automatically added to your bill without giving you the choice to remove it and on this charge VAT is applicable.
This contrasts with VAT which is imposed on goods and services and is charged throughout the supply chain, including on the final sale. VAT is also imposed on imports of goods and services so as to ensure that a level playing field is maintained for domestic providers of those same goods and services.
When not to charge VAT
VAT is applied to most goods and services but if you're planning on international travel, there's a good chance you can get a refund on at least some of your VAT payments.
VAT was initially created to unify the different indirect tax systems in place across different countries. It applies to almost all sales of goods and services that are bought and sold for use or consumption.
Most goods and services are charged at the standard rate of 20%. You should charge this rate unless the goods or services are classed as reduced or zero-rated.
Common mistakes—such as failing to register in the correct countries, applying the wrong VAT rates, or missing important filing deadlines—can lead to serious financial and legal consequences.
Do I have to charge VAT on services? As a rule, value-added tax is generally due on almost any service provided by a business in the UK, unless specifically exempted or relating to non-business activities.
Agricultural products, tuition fees, lending operations, real estate, books, transportation and other necessities are typically VAT-exempt transactions.
23% is the standard rate of VAT. All goods and services that do not fall into the reduced rate categories are charged at this rate.
Exempt goods and services
There are some goods and services on which VAT is not charged, including: insurance, finance and credit. education and training. fundraising events by charities.
How to Avoid Paying VAT When Making Card Payments
Frequently asked questions
These are services which are not subject to the tax and include charity fundraising events, insurance, finance and credit services, education and training, subscriptions to membership organisations and the selling, letting and leasing of commercial land and buildings (though this can be waived).