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VALUE ADDED TAX

When to Charge it, How to Charge it

EXPERT IMPORT VAT Advice 

Customs Manager Ltd. offers expert guidance and support on when and how to charge import VAT, how to pay it and to which country, how to record it in tax returns and through which systems. We analyse your supply chain and help you set up a VAT system that ensures compliant, efficient and effective trade.

LATEST IMPORT VAT UPDATES 

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CONSEQUENCES OF BREXIT FOR VAT

The United Kingdom (UK) has left the European Union (EU) on 31 January 2020, 11 pm BST. The transition period, in which the UK remains aligned to the EU’s Single Market and Customs Union laws, ended on 31 December 2020, 11 pm BST.   For many UK businesses, trading EU outside its structure has more disadvantages, and a greater burden, than if trading inside the Single Market and Customs Union, like an EU business can do.  The EU rules in the field of VAT no longer apply to and in the United Kingdom. This has in particular the following consequences of the treatment of taxable transactions in goods. 

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QUESTIONS AND ANSWERS ON IMPORT VAT

When is it due and based on what rate?

VAT will be due at the importation in the EU (Article 2(1)(d) of the VAT Directive), at the rate that applies to the supplies of the same goods within the EU (Article 94(2) of the VAT Directive).

Who needs to receive it and when?

Traditionally, VAT will be payable to customs authorities at the time of importation, unless the Member State of importation allows entering import VAT in the periodical VAT return of the taxable person.

How to establish the taxable amount?

The taxable amount is based on the value for customs purposes, but increased by (a) taxes, duties, levies and other charges due outside the Member State of importation, and those due by reason of importation, excluding the VAT to be levied, and (b) incidental expenses, such as commission, packing, transport and insurance costs, incurred up to the first place of destination within the territory of the Member State of importation, as well as those resulting from transport to another place of destination within the EU, if that other place, is known when the chargeable event occurs.

How are low value shipments from outside the EU treated?

Since 1 July 2021, an optional import scheme has been implemented covering distance sales of goods imported from third countries or territories to customers in the EU up to a value of EUR 150.

QUESTIONS AND ANSWERS ON VAT AT EXPORT

How is an export VAT exempt?

 Goods will be exempt from VAT if they are dispatched or transported to a destination outside the EU. However, the supplier of exported goods must be able to prove that the goods have left the EU. In this regard, the EU Member States generally bases themselves on the certification of exit given to the exporter by the customs office of export.

EU's IMPORT ONE STOP SHOP

Cross-border value-added tax (VAT) applicable to e-commerce transactions has been modernized across the EU with its 27 Member States.  A previous VAT exemption for the importation of goods in small consignments  with a value not exceeding EUR 22 was removed, making all goods imported to the EU subject to VAT. This means that goods imported from outside the EU are now at equal footing in terms of VAT treatment compared to goods purchased from within the EU.


Objectives of the new rules: 

  • ensure that VAT is paid where consumption of goods and services takes place;

  • re-establish a fair competition between European and foreign e-commerce market players, as well as between e-commerce and traditional shops, which is even more important in the context of the COVID-19 crisis;

  • offer businesses a simple and uniform system to declare and pay their VAT obligations from cross-border transactions to buyers in the EU via two new online systems: the VAT One Stop Shop (OSS) or Import One Stop Shop (IOSS).

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EU VAT Law

The Value Added Tax, or VAT, in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services.

 

It applies more or less to all goods and services that are bought and sold for use or consumption in the European Union. Thus, goods which are sold for export or services which are sold to customers abroad are normally not subject to VAT.

 

Conversely, imports are taxed to keep the system fair for EU producers so that they can compete on equal terms on the European market with suppliers situated outside the Union.

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