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Maco Customs Service: brokerage, software & consultancy

VAT and EU logistics and sales

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Non-EU companies that want to organize an efficient logistics and distribution operation for their sales in the EU or EMEA have four options:

  1. Set up limited fiscal representation in the EU
  2. Register for VAT in the EU
  3. Set up general fiscal representation in the EU
  4. Establish a company in the EU

Maco Customs Service can advise you what the best choice is in your situation. We can also implement your choice either by ourselves or together with relevant partners, such as logistic service providers and accountants.

Limited Fiscal Representation (LFR)

When a distribution and sales process is set up with LFR, no registration at all in the EU needs to take place. LFR can be used for the direct importation of goods into the EU and also for storage and distribution of these goods. Under LFR you cannot buy or sell goods within the EU. Many EU companies also use LFR to avoid having to pay VAT on import and also to directly sell the goods to a customer (ABC transactions). The Netherlands and Belgium have very flexible LFR facilities. LFR cannot be used for e-commerce since sales to private individuals are not allowed. LFR is most commonly offered by a customs broker since it is connected to the import declaration. LFR can be started and ended at any time without additional obligations. Please take a look here for more information about LFR.

VAT registration

VAT registration offers the possibility to flexibly operate within the EU by buying and selling any kind of goods to businesses and private individuals. A VAT registration can often be obtained easily but also gives the obligation to file a monthly declaration. In every relevant country, a registration has to be applied for. Adequate documentation will have to be produced with every monthly or quarterly declaration, especially when a refund is asked for. Any administrative service provider, including customs brokers, can take care of the registration and the VAT declarations.

General Fiscal Representation (GFR)

GFR combines the advantages of LFR and a VAT registration. It offers maximum flexibility in storing, distributing, and selling goods in the EU. Although any company can be a general fiscal representative for a non-EU company, in practice GFRs are mostly customs brokers, since import transactions are involved and risk management is an important element in being a GFR. The risks are caused by the fact that the GFR is liable for everything the represented company does with VAT in the EU. With GFR there is no interference whatsoever with any other taxation in the EU.

Establishing a company

If regular sales activities are planned, people are going to be employed, and other activities related to regular business are necessary, a regular company will have to be established. This of course implies that all other legal and fiscal regulations apply that are relevant in an EU member state. All VAT facilities are then easily available, but they come with various obligations. Mostly accounting firms and lawyers are active in the setting up and implementation of such a legal entity.

LFR gives logistics service providers a competitive advantage

Non-Dutch entrepreneurs can also import goods without paying VAT. With limited fiscal representation, almost all logistical concepts through the Netherlands or Belgium are possible. The Netherlands and Belgium are distribution countries and have a solid competitive advantage over other EU countries. In these two countries, foreign entrepreneurs do not have to pay VAT on import. This makes many costly customs warehouses redundant. Many of Maco’s clients already make use of this advantage. They have a liquidity benefit since they do not have to pay VAT. When cleared, the goods are in free circulation in the EU without any customs interference. LFR can be applied to most logistical concepts. 

Advantages

The Dutch and the Belgians take care of the logistics of many non-European goods. Take, for example, Chinese goods that have to be distributed in the EU. Containers with goods are stripped in the Netherlands or Belgium andspread among different European destinations. The trader or owner of the goods is often not established in the Netherlands or Belgium. Clearing the goods with limited fiscal representation (LFR) presents the following advantages for non-Dutch or non-Belgian clients:

  • No import VAT is due
  • When cleared, the goods are in free circulation in the EU and no longer require customs interference
  • The goods can be delivered anywhere in Europe; they can even be re-exported to countries outside the EU
  • The owner of the goods does not need to be established in the Netherlands or Belgium or to be registered here
  • No bank guarantees need to be issued
  • There are no set-up or close-down costs
  • Goods can be kept in stock indefinitely

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