Customs & VAT When Importing to the EU: A How-to-Guide

About to import goods, such as toys, electronics or medical devices, from Asia to the EU? In this article, you will learn how to calculate import duties and VAT in 5, relatively speaking, simple steps.

In addition, we also explain when you pay import taxes, whether you’ll need an import license and much more.

This guest post is written by Fredrik Grönkvist of Chinaimportal.

Step 1: Calculate the customs value

Import duties and VAT are calculated based on the customs value. In the European Union, the customs value is based on the following:

• Unit cost (paid to the factory)
• Shipping costs (to the first port in the EU)
• Shipping insurance

In addition, the customs value may also include the following expenses:

• Design and other services billed by the supplier
• Product samples, molds and other tooling

As such, you cannot do more than an estimation of the customs value, until you are ready to ship the products.

Step 2: Product classification and duty rate

Different products have different duty rates. Product A may have a duty rate of 3%, while Product B may have a duty rate of 12%.

All EU member states have the same duty rates, so it doesn’t matter if you import a product to Spain or Ireland - it’s the same duty rate.

You can find a databank of duty rates in the EU TARIC databank.

Some products are very simple to classify, as they are already well defined in the EU TARIC databank. However, some products may require a new classification - something that you can apply for directly from your local customs authorities.

Step 3: Calculate the import duty rate

It’s simple to calculate the duty rate, now that you’ve calculated the custom value and identified the applicable duty rate.

Let’s assume these numbers:

1. Customs Value: EUR 10,000
2. Duty rate: 5%

Import Duty = EUR 10,000 x 5% = EUR 500

Step 4: Value Added Tax (VAT)

VAT is to be paid on all imports, coming from outside the EU. The rate is set depending on the EU member state. For example, the standard VAT rate in Ireland is set at 23%, while it’s 21% in Spain.
However, calculating the VAT is slightly different from the import duty.

Let’s assume these numbers:

1. Customs Value: EUR 10,000
2. Duty rate: 5%
3. Import Duty = EUR 500
4. VAT = 23%

VAT = (EUR 10,000 + EUR 500) x 23% = EUR 2,415

Not exactly rocket science.

Notice that you can also deduct the VAT you have paid on purchases (including imports) from the VAT you charge on your sales invoices. If you have paid more VAT on purchases than that you’ve charged, you even get back the money.

Questions & Answers

When do I pay import duties?

Import duties are normally paid upon arrival in the port of destination. You can either fill in the customs forms yourself or pay your freight forwarder EUR 50 to do it for you. It’s normally easier that way.

When do I pay VAT?

VAT is normally declared on a monthly or quarterly basis. As such, you may not need to pay import VAT upon arrival. However, this depends on national VAT rules, as they differ in each EU state.

Do I need an import license?

If you import agricultural products, tobacco, alcohol or other restricted goods, you may need to apply for an import license. This is, however, generally not required for most consumer products.

That said, you need to register an EORI number, which is free and can be done online.

Do I need to submit test reports or other compliance documents?

Submitting test reports, declaration of conformity or other compliance documents is, so far at least, not a mandatory part of the customs clearance procedure.

However, the customs authorities still have the right to request such documents if they wish - and it’s increasingly common that they do so for electronics and children’s products.

If you fail to prove that your goods are compliant, they may seize and destroy your goods - without any compensation.

This may also the case if the product doesn’t have a user manual or the correct labels.

Make sure that your products are fully compliant, correctly labelled and documented - before you import them to the EU. There are no second chances when it comes to product compliance.

About Chinaimportal.com

Chinaimportal.com provides free webinar, tutorial videos and guides covering supplier sourcing, product development, crowdfunding and much more. Learn more about EU customs and VAT in the following articles:

• VAT on Imported Goods from China: A Complete Guide
• Customs & Taxes When Importing from China: US, EU, Australia & Canada