Tips on Exporting to Developing Countries: Finance and Legal Considerations
Published 27th of October 2013·Updated 3 April 2026
Reviewed by: Reviewed for accuracy April 2026
Exporting to developing countries can open significant revenue opportunities for UK businesses, but it carries financial and legal risks that domestic trading does not. Before you sell overseas, you need to check import regulations in your target country, understand your UK tax obligations, protect yourself against non-payment, and manage currency risk carefully.
Short Summary
UK Export Finance (UKEF) is the government's export credit agency. It offers insurance and guarantees to protect UK exporters against non-payment, particularly in higher-risk markets where commercial insurance may be unavailable.
Importing countries in the developing world often have different technical safety standards, labelling requirements, and import controls. A product that is legal in the UK may require certification or modification to be sold legally in your target market.
Currency fluctuations can significantly erode your profit margin. If you invoice in a foreign currency, consider using a forward contract through your bank or a currency specialist such as Moneycorp or OFX to lock in an exchange rate.
Corruption risk is a genuine concern in some markets. The UK Bribery Act 2010 makes it a criminal offence for UK businesses to pay bribes anywhere in the world, even if bribery is common practice in the target country.
GOV.UK's export support service and the Department for Business and Trade offer free guidance for UK businesses looking to export, including country-specific market reports and access to trade advisers.
What legal checks do you need to make before exporting?
Every country has its own import regulations, product standards, and licensing requirements. What you can sell freely in the UK may require certification, modification, or an import licence in your target market.
Check the import rules for your product category using the UK Government's trade tariff tool at gov.uk/trade-tariff. For food, electrical goods, cosmetics, and children's products, regulatory requirements in developing markets can be particularly detailed. Engaging a local freight forwarder or trade compliance consultant in the target country is strongly advisable before your first shipment.
How do you protect against non-payment when exporting?
Non-payment is the most common financial risk in export trade, particularly in markets where legal enforcement is slower or less certain. The main tools to protect yourself are:
- Letters of credit: the buyer's bank guarantees payment once you present shipping documents. This is the most secure payment method for high-value exports.
- Export credit insurance: covers you if the buyer fails to pay. UK Export Finance (UKEF) can provide cover in markets where commercial insurers will not.
- Advance payment: requiring full or partial payment before shipping eliminates non-payment risk entirely, though some buyers will not agree to this.
| Payment method | Your risk level | Buyer's risk level |
|---|---|---|
| Advance payment | Low | High |
| Letter of credit | Low | Low |
| Documentary collection | Medium | Medium |
| Open account (payment after delivery) | High | Low |
What are your UK tax obligations when exporting?
Exporting goods from the UK is generally zero-rated for VAT purposes, meaning you charge 0 per cent VAT on exports to non-UK customers. You must retain evidence of export (such as customs declarations and shipping documents) to support your VAT return.
Corporation tax on profits from export sales is payable in the UK in the normal way. If you have a permanent establishment (such as an office or warehouse) in the target country, you may also have tax obligations there. The UK has double taxation treaties with many countries to prevent you being taxed twice on the same income. HM Revenue and Customs publishes the full list of applicable treaties at gov.uk.
How do you manage currency risk when exporting?
Invoicing in sterling transfers the currency risk to your buyer, which may make you less competitive. Invoicing in the local currency or US dollars (a common trade currency for developing markets) means exchange rate movements can affect your actual sterling receipts.
A forward contract allows you to agree today's exchange rate for a payment you will receive in 60 or 90 days. Specialist currency brokers including Moneycorp, OFX, and Wise Business typically offer better rates and lower fees than high-street banks for international transfers.
What do you need to know about the UK Bribery Act?
The UK Bribery Act 2010 applies to all UK businesses regardless of where they operate. Paying a bribe to a foreign official, a business contact, or anyone else to win or retain business is a criminal offence, even if the practice is routine in that country.
Penalties include unlimited fines and up to ten years' imprisonment for individuals. Companies can also be prosecuted if they fail to prevent bribery by an associated person (such as a local agent). You should have a written anti-bribery policy and carry out due diligence on any local agents or distributors before engaging them.
Where can UK exporters get free advice?
The Department for Business and Trade (DBT) offers free export support through GOV.UK and a network of regional International Trade Advisers. These advisers can help with market research, finding buyers, and navigating trade regulations.
UK Export Finance (UKEF) has a helpline for businesses looking for export finance and insurance solutions. The British Chambers of Commerce also provides export documentation services and connects members with overseas networks.
FAQ
Do I need a licence to export goods to developing countries?
Some goods require an export licence regardless of destination, including military equipment, certain chemicals, and some high-technology products. Check the Export Control Joint Unit (ECJU) guidance at gov.uk before exporting. Most everyday consumer and commercial goods do not require a specific export licence.
Is VAT charged on exports to developing countries?
No. Exports of goods to countries outside the UK are zero-rated for VAT. You charge 0 per cent VAT but can still reclaim input VAT on costs related to those exports. You must keep evidence of export for at least six years to satisfy HMRC in the event of an audit.
What currency should I invoice in when exporting?
The most common options are sterling, US dollars, or the local currency. Sterling invoicing is simplest for your accounting but may put buyers off if their local currency is volatile against the pound. US dollars are widely accepted as a trade currency in many developing markets. Consider using a forward contract if you invoice in a foreign currency.
What insurance do I need when exporting?
At minimum, you need goods-in-transit insurance to cover your products while they are being shipped. For non-payment risk, export credit insurance from UKEF or a commercial provider protects you if the buyer defaults. If you have staff travelling to the target country, you will also need business travel insurance with appropriate medical cover.
How do I find reliable buyers or distributors in a developing country?
The Department for Business and Trade can connect UK exporters with vetted local contacts through its trade networks. Trade shows, local chambers of commerce, and platforms such as Alibaba and Global Sources are also used to identify potential buyers. Always conduct due diligence before entering into a distribution agreement, including checking the local company registry and seeking references.