By Kevin Shakespeare, director of stakeholder engagement at IOE&IT
When goods are imported into the European Union (including the UK), import VAT is charged as a percentage of the value of the imported goods.
The company responsible for clearing the goods through customs is responsible for paying this VAT at the time of import – so it can have a big impact on your cash flow and cost of import.
In general, the import VAT paid is fully recoverable by the importing company and can be claimed back through the periodic VAT declaration process.
Even though the VAT can be claimed back, there can be a delay from the time of import until the date of refund – this can place a cash flow strain on the importer.
Most importing countries apply a VAT deferment scheme.
When the option is available, an importer can obtain the right to defer the payment of the tax. This means the import VAT no longer needs to be paid at the time of clearing customs, and simply needs to be declared appropriately in the local VAT return submission (usually through a duty deferment scheme).
This deferment removes the cash flow impact of importing.
