Telephone call from Customs “the reverse-charging of the value added tax on imports has possibly been incorrectly applied”. An audit will be undertaken shortly.
Not a pleasant message to receive but one that is happening regularly these days as logistics service providers face problems due to the incorrect application of reverse-charging on imports, in particular with e-commerce shipments. In this short article, I will indicate what, from our experience, goes wrong and what logistics service providers should be aware of.
Imports of e-commerce goods are gaining an important place in the total flow of goods to Europe. In particular products from Asian vendors trading via platforms such as Amazon and Ebay and selling direct to European consumers. The clearance of such shipments is often difficult given the wide variety of products and because frequently the sales price is not (or not yet) available at the time of importation, and also due to the (too) many claims seeking exemption for low value shipments (€22 for VAT and €150 for import duty). Clearing e-commerce shipments in the correct way is in itself a challenge.
The e-commerce traders themselves also struggle to comply with their VAT obligations. This can be seen from the many reports on the “E-commerce VAT gap”. The European Commission has signaled the practical, as well as the less practical, problems relating to the obligations for e-commerce value added tax and customs and has recently made a number of proposals, on the one hand, to make it easier for foreign companies to make declarations and, on the other hand, to make the trading platforms partly liable for the VAT on sales via their platforms. More on this can be found on the website of the European Commission but what I would like to touch on in this article is separate from this and concerns the reverse-charging of VAT on imports.
Reverse-charging of VAT on imports means that the VAT due upon importation is not required to be paid directly upon importation but it can be included on the importer’s periodic value added tax return or that of his limited tax representative. As import VAT may also be included as a deduction on the same return, this results on balance in no import VAT having to be paid.
As far as I can see, vendors outside the EU are aware that in the Netherlands there are opportunities not to have to pay import VAT and logistics service providers are letting themselves be coaxed into applying reverse-charging without fully complying with all of the legal requirements. From our experience it appears that there are four types of errors or mistakes being made.
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