Import VAT: how it is charged and deducted

Import VAT is the VAT an EU country charges on goods that come in from outside the EU. It becomes chargeable when the goods are imported, on a taxable amount that starts from the customs value and adds the duties due because of the import and the transport costs to the first destination in the country [1]. A business that imports goods for its taxed activities deducts it like other input VAT [1], and EU law lets countries move it into the VAT return so that nothing is paid at the border [1].

How import VAT is calculated

The taxable amount on importation is the customs value [1]. Added to it, where they are not already in it, are the taxes, duties, levies and other charges due by reason of importation, other than the VAT itself, and incidental costs such as commission, packing, transport and insurance up to the first place of destination in the importing country [1]. The customs value already includes freight and insurance to the EU border; the import VAT base adds the leg from the border to the first destination. The guide to customs value with CIF and FOB covers the first part.

The rate is the VAT rate of the country of import. Germany charges 19 % as standard and 7 % on the goods listed in Annex 2 of its VAT Act [2]. The Netherlands charges 21 % as standard and 9 % as the reduced rate [3].

An illustration with round figures: goods with a customs value of EUR 10,000, customs duty of EUR 400 and EUR 200 of inland freight to the first destination give a base of EUR 10,600. At 19 % the import VAT is EUR 2,014. The import duty calculator runs the same sum for a real code.

Who pays import VAT?

The VAT Directive leaves it to the country of import to designate the person who pays [1]. In Germany the customs rules apply to import VAT as well: customs levy it together with the duty, and the debt arises when customs accept the customs declaration [4].

Deducting import VAT

A taxable person may deduct the VAT due or paid on the importation of goods into its country, as far as the goods are used for its taxed transactions [1]. Germany's VAT Act allows the deduction of import VAT incurred on goods imported for the business [5]. The proof is the customs document, such as the import duty notice, which for declarations through ATLAS may be electronic [6]. German customs adds a point for full deductors: only the import VAT actually charged can be deducted, so an amount set too low because transport costs were left out is also the amount you deduct [6].

In the Netherlands the importer deducts the import VAT if the goods were destined for it according to the customs declaration, that is, imported in its name, and it proves this with the import documents and the payment demand that belongs to them [7]. The name on the declaration therefore decides who can deduct. Agree it with your broker before the first shipment.

Paying through the VAT return instead

EU law lets member states provide that import VAT is not paid at importation, as long as it is entered in the VAT return [1].

• Ireland: postponed accounting. Since the end of 2020, accountable persons registered for VAT and for Customs and Excise can account for import VAT on their VAT3 return instead of paying it at importation, and reclaim it in the same return under the usual rules [8]. The field PA1 holds the customs value plus customs duty of the goods imported this way [8]. The importer, not its broker or freight agent, accounts for it [8]. Using it is optional, and it depends on conditions such as compliance with the tax acts and full and true records [8].
• Netherlands: the article 23 licence. With a licence under article 23, the importer declares the import VAT in its VAT return and pays no VAT to customs [9]. It has to be established in the Netherlands, import goods from outside the EU regularly and keep separate records that show the import VAT due; the tax office decides within eight weeks [9]. A business established elsewhere uses a fiscal representative: a general fiscal representative can apply for the licence on its behalf, and a limited fiscal representative may let it use its own licence [10].
• Germany: deferred payment. Import VAT covered by an approved deferment of payment falls due on the 26th day of the second month after the month concerned [11]. The deferment needs no security where the import VAT can be deducted in full [11].

What moves the import VAT

Every figure in the base comes from the shipment's documents. A wrong customs value changes both the duty and the import VAT. A different tariff code changes the duty, and with it the base. Freight to the first destination that no document shows is missing from the base. Where the importer cannot deduct the import VAT in full, nothing evens out later, which is why German customs want the base worked out precisely for that group [6].

Athren works next to the broker or customs team you already have. It reads the supplier's invoice, the packing list and the transport document you already send them, proposes the tariff code, checks customs value and origin, and asks your supplier what is missing before the goods arrive.