Import VAT documentation: Set your records straight

It’s a vicious cycle. You purchase goods, go through the process of reclaiming your VAT and then, at the very end, you’re bombarded with additional questions due to an administrative error. Although a piece of paper may seem insignificant in the grander scheme of things, it plays a pivotal role in successful Import VAT recovery for your business. Here’s everything businesses need to know for successful Import VAT recovery. 

Which factors influence an Import transaction? 

VAT charges will be payable when a company Imports goods into the European Union (EU) or another third country . We’re talking paperwork and plenty of it. However, which deciding factors influence the documents required from businesses? The right documentation depends on:

• The type of goods Imported
• The country from where the goods were exported
• The Import country’s specific VAT rules 

The Import transaction: Who are the parties involved?

Generally, there are three parties involved in an Import transaction, the Consignor (Exporter), the Declarant, and the Consignee (usually the Importer). They each play a significant role in the VAT process. 

The Consignor

Is usually the Exporter and is the business or the supplier who is shipping the goods from one country to the other.

The Consignee

Usually the party who takes ownership of the goods once they have been cleared through customs and can be moved freely to the required destination, and would also be responsible for Import formalities, as Importer of Record. 

This should be determined by the ‘Incoterms’ agreed upon between the parties. These terms decide whether the Exporter or the Importer is responsible for paying the duties and taxes.

The Declarant

The Declarant is the party who makes the customs declaration, usually on behalf of the Exporter or Importer. The Declarant is usually a logistics provider or customs broker. They can offer direct or indirect representation, indirect means they can be jointly liable for the customs process along with the Exporter or Importer. 

The importance of customs documentation

Customs clearance gives the final go-ahead for Imported goods. However, as mentioned before, without the right documentation - the process meets a standstill. 

However, even if goods are cleared for customs, how can you be sure the paperwork will allow Import VAT recovery?

Most Import VAT roadblocks are dealt with on a case-by-case basis. But let’s take a look at a few examples;

• The wrong parties are declared on the customs declaration
• The wrong values are used 
• The incorrect codes are used and therefore cannot make use of the  Import VAT deferment schemes
• The Consignee cannot be named as Importer of Record
• The Importer does not have the correct customs representation

With inaccurate documentation, your Import VAT recovery could be at risk.

Contact the experts for a checklist to ensure that you have the correct documentation for your Import VAT recovery. 

A heads-up for countries with simplified Import VAT processes 

Generally, it is expected that Importers pay the applicable Import VAT and duties when goods go through customs. However, some tax authorities have schemes in place that allow traders an opportunity to delay the payment of Import VAT. Sounds simple enough? But there’s a catch: to defer the Import VAT, you may need prior authorization. In addition, in some countries non-resident businesses cannot apply for these schemes themselves; so they will need to appoint a fiscal representative. 

Get unstuck with VAT IT

Being stuck with an unexpected Import VAT cost can cause unnecessary disruption to your business and impact your supply chain. Instead, contact our experts to ensure each piece of paperwork is correct from the start and reclaim your VAT with ease.