re:TRADE BLOG

Insights into supply chain & VAT optimization.

Published: 15 Aug 2022

Deferring import VAT: A trading strategy to overcome a post brexit hangover

Import VAT and customs duties have made importing much more expensive. Fortunately, there are smart strategies that help you overcome this trade hurdle and minimise trade costs. We explain how your business can ship to Europe more cost-effectively.
import vat

Brexit has made trading between the UK and EU more complex and more expensive. For smaller businesses, in particular, customs duties and import VAT now pose a serious cash flow challenge.

Fortunately, there are strategies to manage the cost of shipping, reduce the administrative burden of trade and get your goods to your clients more efficiently and on time. 

Deferring import VAT is one of the most effective ways to manage cash flow. However, implementation is often enormously complex. Fortunately, re:TRADE can manage the process for you.

Why you need to pay import VAT after Brexit

When you ship goods from one EU Member State to another, no import VAT is due. By contrast, import VAT is charged when goods are imported into a Member State from outside the EU.

Now that the UK is no longer part of the EU, imports into the EU from the UK are subject to import VAT (with the exception of shipments originating in Northern Ireland, which are regulated by the Northern Irish Protocol). 

In many cases, goods shipped between the UK and EU are also subject to customs duties.

Overcoming Brexit challenges: Analysing the trade data.

Deferring or reclaiming import VAT

Traders can generally reclaim import VAT when they file their VAT returns. You need to be VAT registered in the country of import to take advantage of this opportunity. For traders without a European VAT registration, claiming import VAT gets trickier.

You’ll need to claim it via the 13th directive which involves considerable paperwork, and stringent deadlines. However, based on the value of your goods, it’s a process well worth the effort when you consider the potential savings. 

However,  there are two issues.

  1. Firstly, importers often fail to recover all the import VAT to which they are entitled. This needlessly increases the cost of trade.
  2. Secondly, even when importers ultimately do recover import VAT, the additional upfront cost can cause serious cash flow issues.

To overcome this problem, traders can, in some cases, take advantage of deferred import VAT. In certain countries, you can take advantage of this and avoid paying Import VAT at the point of customs accounting for it on your local VAT return.

As you are simultaneously reclaiming the import VAT, the cost is effectively cancelled out. That is, you still account for the import VAT, but you do not actually pay a cash amount (if that sounds complex, don’t worry, we can take care of the whole process for you!).

How do you defer import VAT?

Not all EU states permit you to defer your import VAT and the processes and rules are different in each country. There are a number of EU Member States that will permit you to postpone your import VAT. However, the process can be administratively demanding. 

For instance, most importers based in non-EU states that import into France must appoint a Fiscal Representative to take advantage of the deferment. In the Netherlands, importers must acquire a special Article 23 licence.

Customs duties

Following Brexit, trade between the UK and EU is often subject to customs duties. While you cannot recover customs costs, you can take the correct measures to optimise your customs payments. 

For instance, under the Brexit trade agreement, there are no customs duties if you can demonstrate that goods originated in the EU or UK. However, meeting the Rules of Origin requirements can be enormously complex. If you are unsure how to take advantage of tariff-free trade, it is a good idea to consult a trade expert. 

In addition, many importers may be overpaying because they are using the wrong customs codes.

A customised trade solution for your business 

Overcome the hurdles of Brexit and make your supply chain simple again.
To fully optimise trade, you need an integrated solution that considers your entire supply chain.

Get in touch with re:TRADE for a holistic trade service that secures the best shipping rates, optimises import VAT, ensures complete customs and VAT compliance, and ensures your goods get to market as efficiently as possible.

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