Import VAT

What it means

Import VAT is assessed when goods from a third country are released into free circulation. The base is the customs value plus duty, transport and other costs to the first destination in the EU.

A VAT payer can deduct it if the customs decision names them and the goods serve taxable supplies. Without the document from customs clearance there is no deduction.

Only goods from third countries count as imports. Goods from a supplier in another EU state do not pass through customs, and the payer declares the tax itself as an acquisition of goods from another member state; services from abroad are handled by self-assessment in the return, not at customs.

How it works in practice

The assessment document is matched to the supplier’s and the carrier’s invoices so the acquisition cost adds up. Those three papers arrive at different times, and that is where discrepancies start.

In some cases self-assessment on import is available, so the tax is declared and deducted in the return rather than paid to customs. The effect on cash flow is substantial.

With small parcels from Asia a courier often clears the goods as customs representative and recharges both duty and VAT to the company. That invoice is not enough for a deduction, so we ask the courier for the customs decision itself and claim the tax in the return only once we have it.

What to watch out for

If the customs decision names the carrier or the agent, the company cannot deduct although it bore the tax economically. Whose name goes on the document is worth checking before clearance.

An undervalued supplier invoice meant to cut the duty comes back with VAT attached. Customs can raise the customs value afterwards on the basis of comparable imports, and the bill for duty, tax and penalties sometimes arrives long after the goods were sold.