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VAT on import

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Please watch this video and learn how VAT on import works in the member states of the EU.

The reverse charge mechanism discussed in the film is available for companies in the Netherlands and Belgium. Germany does not have this system. In the Netherlands, it is called a “permit to apply the transfer rule", according to article 23 of Dutch VAT law. Importers holding such permits can simply report on their monthly VAT declaration the total import VAT that is due. Two lines lower on the form, they can deduct the same amount. In the Netherlands, almost all companies that import goods have a VAT transfer permit. The tax offices provide these almost on demand. In Belgium, the same facility is made available to all importing companies. Effectively this means that by using the reverse charge mechanism, in The Netherlands and Belgium, no VAT needs to be pre-financed and therefore no cash flow disadvantage for companies.

VAT number

The application of the transfer rule is connected to the use of the VAT number of the importing company. The VAT number of the importer must be stated on the import declaration by the customs broker. In this way, the customs and tax authorities can simply gather all information about the VAT that is being transferred. This makes it simple for tax authorities to verify all import transactions. The system is extremely efficient and works very well. The consequence for importers and customs brokers is that the monetary transactions are limited and that the import declaration has become much less risky since liability to pay VAT is no longer involved. Customs brokers can now concentrate on more important matters, such as correctly defining the customs value, goods code, and origin preference.

Transfer rule

It is remarkable that only a few countries besides Belgium and the Netherlands have such a transfer rule. In Germany, for example, VAT must be paid at the import. Because the VAT deduction cannot always take place in the same month, a liquidity disadvantage is created for the importer and a liquidity advantage is created for the national treasury. It may involve very large sums of money, that can be of much interest as part of government finances. Perhaps that is why it is so difficult to switch from a system without the VAT transfer rule to a system that makes the VAT transfer rule available. Because of the VAT transfer at the import in the Netherlands and Belgium, a competitive advantage is created at the import via these countries with respect to other EU member states.

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