Import VAT
Also known as: import VAT, VAT on import
Import VAT is the turnover tax you owe when goods enter free circulation in the EU. The base is the customs value plus the import duty, and in the Netherlands you can shift the charge with article 23.
How do you calculate import VAT?
The base for import VAT is the customs value, increased by the import duty and by other charges due on import, including excise if it is charged on the same declaration. On that base you apply the national VAT rate. In the Netherlands that is as a rule twenty-one per cent, with a reduced rate of nine per cent for certain goods. The rate follows from the national codes in the DTV, not from TARIC. The VAT itself is not part of the customs value. If you add it in by mistake, you charge VAT on VAT. That happens especially on DDP invoices where the seller quotes a total including duties and tax. Without a breakdown the declarant must take that total as the value, or obtain the build-up from the seller before the declaration goes out. DMS calculates the amount per item line. A wrong goods code can affect both the import duty and the VAT rate, for example if a heading shifts from the reduced rate to the standard rate. Check both, not only the customs duty.
When is import VAT due?
Import VAT is due at the moment the goods are released into free circulation. For as long as they stand under T1, customs warehouse or temporary storage, there is no VAT debt, just as there is no customs debt. Release into free circulation is the taxable event, even if the goods are still physically on the terminal. Release in DMS is the moment the charge arises. Since 1 July 2021, VAT is due on every imported consignment, regardless of value. The old exemption up to twenty-two euro no longer exists. The import duty exemption up to one hundred and fifty euro still does. A parcel of thirty euro can therefore be free of import duty and still carry VAT. In the e-commerce chain that VAT runs via DECO, or has already been charged via IOSS. Without a shift you pay the VAT to Customs, usually via the same current account as the import duty. As a taxable person with a right of deduction you reclaim that amount later on the periodic VAT return. Between paying and reclaiming sits working capital.
What does an article 23 authorisation deliver?
Article 23 is a Dutch authorisation under the Wet op de omzetbelasting, the Dutch VAT Act. It shifts import VAT from the moment of the customs declaration to the periodic VAT return. You report the VAT as input tax and as output tax on the same return. The balance is zero if you have a full right of deduction, and you did not first have to pay the amount to Customs. In DMS the declaration must carry the authorisation number and the matching code. If it is missing, or the authorisation has expired, DMS calculates the VAT as an amount still to be paid. A declarant working for a client with article 23 therefore checks the number per consignment, not once a year. Article 23 is not an EU scheme. Belgium, Ireland and the United Kingdom have their own forms of shift or deferral, with other conditions and other codes. Name the Dutch authorisation as such on the declaration and in the accounts, and do not pretend that a foreign scheme does the same thing.
How does IOSS work on small consignments?
IOSS, Import One-Stop Shop, is the EU scheme under which the seller already charges the VAT at the sale to a consumer. On import the consignment then enters without VAT at the border, provided the IOSS number is on the declaration and the intrinsic value does not exceed one hundred and fifty euro. DECO uses the H7 dataset for that, with a six-digit HS code. Without a valid IOSS number the VAT is charged on import. In the parcel flow the carrier often advances that amount and recharges it, plus clearance costs, to the recipient. A wrong or expired IOSS number is a classic reason that a consignment the webshop sold as VAT-inclusive still gets a recovery at the recipient. The declarant can validate that number before the declaration goes to DECO. IOSS covers the VAT, not the import duty. Above one hundred and fifty euro IOSS does not apply and the ordinary import declaration in DMS applies, with import duty and VAT. Excise goods fall outside this route in any case.
What if the importer is not established in the Netherlands?
An importer not established in the Netherlands cannot simply shift import VAT onto their own return. Without a Dutch VAT registration article 23 is not available, and without a right of deduction the VAT paid to Customs remains a cost. In that situation a fiscal representative acts, or the foreign business registers for VAT in the Netherlands. Fiscal representation is a separate authorisation, distinct from customs representation. The fiscal representative takes over the VAT obligations and files the periodic return. The customs declarant and the fiscal representative are often different parties. On the import declaration the VAT number, the form of representation and any article 23 authorisation must belong to the same fiscal position. DDP makes this sharper still. Under DDP the seller is responsible for the import, including the VAT. A seller outside the EU who sells DDP Netherlands without registration or fiscal representation cannot have the declaration filed correctly. The declarant who still takes that file on runs the risk that the VAT cannot be shifted and that the client cannot deduct the amount.
How do you avoid paying VAT twice?
Double VAT arises when the charge on import does not line up with the deduction or the shift afterwards. Classic cases: the VAT has been paid to Customs and the periodic return does not report it as input tax, or article 23 was applied while the authorisation was missing and Customs collected the amount anyway. In both cases money is tied up until the correction is closed. The documents you need are the import declaration with MRN, the notification of the customs debt, and the periodic VAT return. Those three must show the same amount, the same period and the same VAT number. A second pitfall is the DDP invoice that has already included VAT of the country of destination, while the declarant calculates that VAT on import again. Without a build-up of the price you cannot see what is in it. Ask the seller for a breakdown of goods, freight, import duty and VAT, or treat the total as customs value and accept that you calculate duty and VAT on too high a base until the documents are there.