VAT on Exports — DAP vs DDP: What UK Businesses Need to Know
When goods leave the UK, UK VAT is zero-rated. But that does not mean no VAT is paid anywhere — it means the question of who pays import VAT in the destination country becomes critical. The answer depends on your Incoterms.
What Is DAP (Delivered at Place)?
Under DAP terms (also sometimes called DDU — Delivered Duty Unpaid), the customer is the importer of record. They are responsible for clearing the goods through customs in their country and paying any import VAT and duty that applies on arrival.
From your perspective as the UK seller:
- You charge 0% UK VAT on the invoice
- You must obtain and keep proof of export (carrier docs, CMR, tracking)
- You state the Incoterms on the invoice
- You have no further VAT obligation in the destination country
What Is DDP (Delivered Duty Paid)?
Under DDP terms, you are the importer of record. You clear customs and pay import VAT and duty in the destination country on the customer's behalf.
From your perspective:
- You still charge 0% UK VAT (goods are still leaving the UK)
- But you may need to register for VAT in the destination country
- You must account for and pay local import VAT and duty
- This significantly increases administrative complexity and cost
Never offer DDP terms without speaking to your accountant first. The local VAT registration and compliance costs in some countries make DDP uneconomical unless priced in from the start.
What Goes on the Export Invoice?
| Element | DAP Invoice | DDP Invoice |
|---|---|---|
| VAT rate | 0% | 0% |
| VAT wording | "Export from UK" | "Export from UK" |
| Incoterms | State "DAP [named place]" | State "DDP [named place]" |
| Additional note | None | Note local duty/VAT handled separately |
Records You Must Keep
Keep all of the following for at least 6 years:
- The commercial invoice with Incoterms stated
- Carrier documents (bill of lading, CMR, airway bill)
- Delivery confirmation or tracking showing arrival abroad
- For DDP: import declarations and evidence that you were the importer of record
Frequently Asked Questions
Q: Can I zero-rate an export before the goods have physically left the UK? A: You can issue the invoice in advance, but you must obtain export evidence within the required time period. If the goods do not leave the UK, the supply is standard-rated and you will owe 20% VAT to HMRC.
Q: Does DAP vs DDP affect the customer's experience? A: Yes significantly. Under DAP, goods may be held at customs until the customer pays import VAT and duty — which can delay delivery and cause frustration. Under DDP, the customer receives goods with no additional charges at the door, which is a better customer experience but more complex for you.
Q: Do I need a separate VAT registration for every country I export DDP to? A: It depends on the country and the volume of sales. Many countries require a non-resident VAT registration if you are the importer of record. Some have thresholds below which registration is not required. Always check on a country-by-country basis before agreeing DDP terms.
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