Are you a company, importing goods into the European Union? Are you struggling with customs declarations and trying to find your way in the European Unions' tax system maze? Have you paid VAT on your import shipments because you did not have a fiscal representative? This blog will explain to you how to handle all these important, yet somewhat complex formalities and how you can turn them in an advantage instead. Possibly even optimising your cash position at the same time.
When exporting, or importing any type of goods, you will have to declare the items for customs clearance. Declaring customs one of the most important steps you will have to take. Simply put, this the paperwork required to lawfully receive your goods, when importing, and further distribute or assemble before selling to the end customer. In this blog, we will elaborate on the documentation, possible advantages and different options for importing goods with help from customs specialists and fiscal representatives into the Netherlands serving as the main gate to Europe.
The activities and competencies of Customs Authorities
The customs offices in the Netherlands have a broad range of activities and responsibilities. However, the basic activity of customs is checking the lawful activities of goods entering, leaving or transiting the borders of the European Union, as the Netherlands is one of the 27 Member States.
In the process of doing this three key points are continuously being checked by customs:
Control on the incoming, outgoing and transiting goods
Goods transported within the EU are on a basic free of any customs clearances. However, when entering or departing the union, the import or export documents must be declared at customs. This is one of the customs office main functions, the controlling role of checking all that comes in and goes out of the union. Once checked and approved, the goods are able to move freely within the Union until they are moving past the borders of the EU again.
- Charging and collecting Value Added Tax (VAT)
When passing the Unions' borders, the customs office makes sure that VAT and import tariffs are either charged or collected. The amount of import tariffs you will have to pay depends on the customs value. The customs value consist of:
- The transaction value of the goods
- Taxes and tariffs that increase cost prices, excluding VAT
- The additional costs, VAT
- Stop function
The third function customs offices have, is to check and if needed block whatever goods come into the union. When declaring goods to customs, you will need to provide documentation that includes HS codes (Harmonised System codes). These codes specify, amongst other things, what products you are entering into the Union, the materials they exist of and more. In case there is a potential risk of illegal goods entering the union such as drugs, (wild) animals or harmful feed or plant or any other products found to be not legal to be entering, or sold by the European Union and its Member States. To filter and stop illegal goods from entering the Union, customs offices carry out random checks once goods are about to enter. These efforts filter about 1% of all illegal streams. The 1% displays how hard it is to stop these crimes from happening, and the challenges faced by customs authorities every day.
Outsourcing customs declarations
Would you like to mitigate risk, prevent potential fines and stop having to worry about endless paperwork and formalities? Outsourcing your customs activities and declarations to a specialized party, like Broekman Logistics. The advantages of outsourcing this part of your supply chain helps to prevent problems that could lead to additional paperwork, potential problems and unnecessary headaches. These problems can be easily prevented and taken care of by giving another party the power to declare customs on behalf of your organisation.
Improving cash flow by smart VAT declarations in the Netherlands
Did you purchase goods for your company and were you charged VAT, or did you pay VAT at the moment of import? When exporting to the EU, or importing goods into the EU at some point VAT will need to be paid. Understanding VAT requires some basic knowledge of the functioning of the European Union and how the competencies are distributed. Under European VAT rules, businesses and people pay VAT. The EU has the power to lay down the rules on value-added tax, for example, but making or changing those rules requires every country to agree. The sovereignty of when the VAT is to be paid, is, however, laid down in the competencies of the Member States itself, leading us to the following point. It could be an option when importing into the European Union not having to pay VAT at the immediate moment of declaring import documentations. Creating a situation where the payment can either be shifted or even balanced out to zero. Although, that the Netherlands charges, like any other member state charges VAT. It could be very interesting for the liquidity on your balance sheet to possible shift the payment. How? This can be done by applying the Dutch article 23.
Article 23 and fiscal representation
Article 23 is a license, that cannot be requested without being a registered entity in the Netherlands. What you can do, however, is partnering up with a registered Dutch company and have them request the article 23 license on your behalf. The company will now act as your Fiscal Representative, allowing you to shift the payment of VAT and handle other declarations as well. Leaving you unburdened with less work and legal duties and fiscal formalities to worry about.
There are two different options for Fiscal Representation:
- General Fiscal Representation
Under this contract, VAT will be applied under your own VAT number applying the article 23. Meaning that your goods can be custom cleared under your Dutch VAT number.
- Limited Fiscal Representation
In case you choose for Limited Representation, your customs are to be declared under the VAT number of your Dutch representative. This can only be done for import into the Union and is eligible for B2B sales only. Leaving you with limitations on selling to consumers within the Union and other limitations when buying goods in the Union as well.
Would you like to learn more about shifting VAT, or are you curious about what General or Limited Fiscal Representation could mean to your business? Are you interested in the possibilities for your liquidity and cash flow? Please get in touch with our expert.