If you own a business that operates in the European Union, you must have noticed and taken benefit of the intra-Community transactions. This term stands for any services or goods transferred from one European member country from another. Such transfers do not require registering them at the customs office or paying customs taxes. For goods or services acquired outside the EU, the story is different.
Key facts about the import VAT in the EU
Import VAT is a transaction tax levied on goods bought in one country and imported to another. Just like the regular VAT, in the EU, it is calculated as the percentage of the taxable amount (including the customs, duty, transportation and insurance costs for goods acquired outside the EU). The VAT rate charged on imports is the same as if the goods have been supplied within the destination country.
There are cases when import VAT is not applied. VAT is not charged for goods bought online of the value less than entrance country’s threshold, which varies from €10 to a little over €20 within the EU (except for tobacco, alcohol and perfumes).
When acquiring goods that cost more than the customs tax threshold, the import VAT usually paid directly to the seller. If the seller fails to charge the VAT from its customer, then the customer pays the import VAT to the delivery company or at the customs.
For goods that are bought from outside the EU and are meant to be sold in another EU member country, sometimes the import VAT can be suspended and paid at the destination country rather than the entrance country. Usually, this rule applies to goods that are held in temporary storage or are in-transit.
Import VAT in the UK after Brexit
As of 1 January 2021, when the transition period of the UK departure from the EU ends, some changes regarding import VAT UK businesses are subject to will take place. From this day, the UK regulators will no longer differentiate between goods and services coming from the EU and outside of it.
For imported goods that cost less than £135, there will be no longer a VAT payable at the time of import. The import VAT UK traders will face, will be instead charged at the point of sale. In the case of online sales, the overseas supplier will not be obliged to register for VAT in the UK as the online marketplace will be responsible for charging VAT.
Imported goods whose value is above £135 will also be charged differently. Now, companies will be able to choose to postpone the VAT accounting and, instead of paying the import VAT upfront, will submit the import VAT information on their VAT return.
How to account for import VAT?
Import VAT submission is a simple process that does not differ much from regular VAT accounting. The essential step of including import VAT in your VAT returns is completing your customs declaration before accounting for VAT. In the statement, it is important to include your VAT number, which will guarantee that you will be able to return the VAT paid.
After they have paid the import VAT at customs and completed the declaration, businesses are allowed to clear the VAT when filling in the VAT returns. VAT submission as usually is carried online or via post.
Suppose you want to account for imported goods together with other VAT paid. In that case, you can submit VAT online by logging in to your account on the official platform provided by the tax authorities of the country where your business operates.