Import VAT

Import VAT is charged on a base that is wider than the goods value alone. In the EU it is generally calculated on the customs value of the goods, plus the customs duty payable, plus certain transport, insurance and incidental costs up to the destination. The country's standard VAT rate is then applied to that combined figure, which is why import VAT is typically larger than the duty itself.

It is normally collected at the point of import, before the goods are released. A carrier, postal operator or customs broker often pays it on the importer's behalf and then recharges it. For low-value consignments sold to EU consumers, the IOSS scheme lets sellers charge VAT at the point of sale instead, so it is not collected again at the border.

For a VAT-registered business, import VAT is usually not a permanent cost. It can typically be reclaimed as input VAT on the VAT return, provided the goods are used for taxable business activity and the import documentation is in order. This makes import VAT primarily a cash-flow burden: you pay it now and recover it later.

Several mechanisms ease that cash-flow hit. Postponed VAT accounting (used in the UK and several EU countries) lets a business account for import VAT on its VAT return instead of paying it at the border, so no cash leaves the business. A duty and VAT deferment account lets importers consolidate and delay payment. These tools are valuable for sellers importing stock regularly.