EORI and Import VAT When Importing from China

Many import calculations include the duty rate correctly, for example 12 per cent for knitted or woven outerwear, and overlook the second charge at the border. Import VAT is usually the larger amount. Then there is the EORI number, without which no customs declaration goes through. Both need to be sorted out before the first shipment arrives in the EU. This article puts the rules in context and is not a substitute for tax advice.

What the EORI number is needed for

The EORI number (Economic Operators Registration and Identification) identifies businesses to customs authorities throughout the EU. According to the German customs administration, it is a mandatory field in every import customs declaration in the ATLAS IT system and is also needed to prove the paperless assessed import VAT to the tax office.

Businesses that import regularly therefore need the number in every case. Private individuals are exempt as long as they submit fewer than ten customs declarations a year. Applying is free of charge and is done through the customs portal. If you import through a service provider who declares in their own name, you can use their handling, but for imports on your own account you need your own number.

How import VAT is calculated

Import VAT corresponds to value added tax and is charged at the rate of the country of import. In Germany it is normally 19 per cent, 7 per cent for a few privileged product groups, and clothing falls under the standard rate; other EU countries apply their own national rates. The tax base is the customs value plus the duty and the transport and insurance costs to the first destination in the EU, not the value of the goods alone. The tax is collected by the customs administration together with the duty.

An example calculation for a shipment with a customs value of EUR 20,000 and 12 per cent duty: EUR 2,400 duty, then 19 per cent import VAT on EUR 22,400 plus a proportion of freight. Import VAT is therefore around EUR 4,260 plus the tax on the freight, and clearly exceeds the duty. In a landed cost calculation it belongs in its own block, not in a blanket duty percentage.

Due date in Germany: the 26th of the second following month

Since 1 December 2020, section 21(3a) of the German VAT Act (UStG) has applied: if a deferment of payment under the Union Customs Code is granted for import VAT, it is not due until the 26th of the second month following the month of import. The rule was introduced by the Second Corona Tax Relief Act of 29 June 2020. A deferment account with customs is a prerequisite.

The effect is purely one of liquidity. If you pay import VAT only weeks later, but in the meantime file the VAT return and claim the input VAT, you often no longer have to pre-finance the amount at all. Without a deferment account, by contrast, the tax must be paid immediately on import.

When import VAT can be deducted as input VAT

Under section 15(1) sentence 1 no. 2 UStG, a business can deduct import VAT incurred as input VAT if the goods were imported for its business. The Federal Fiscal Court (Bundesfinanzhof) looks at who has power of disposal over the goods at the time of release for free circulation under customs law. The agreed delivery term is not decisive for this point in time.

In practice this means that the input VAT deduction does not automatically go to whoever paid the tax, but to whoever could dispose of the goods at the relevant time. Tax offices regularly examine this point for DDP purchases, because the buyer then often receives power of disposal only later at the destination.

What this means for importers

If you import yourself, you need an EORI number and a calculation that shows duty and import VAT separately; a deferment account with customs also gives you more room on the due date. If you import into the EU through DS Trading (DDP), you normally have nothing to do with either: we import the goods for our company, bear duty and import VAT, and invoice through our German contracting partner. Customers in Germany receive an invoice with German VAT and deduct it as input VAT in the normal way. For businesses in other EU countries, VAT treatment depends on the delivery route and destination country; we clarify how it appears on the invoice before you order and state it in the quotation. The article on import costs shows how the cost blocks add up; the page on customs clearance describes the process at the border. For a specific invoice, send us the item, quantity and destination country via the contact page.

Switzerland: DAP delivery, customs clearance by the customer

Switzerland is not part of the EU and has its own customs and VAT law. For deliveries there we deliver DAP to your address: as the consignee, you handle import clearance, Swiss duty and Swiss VAT. We agree with you before loading which documents your customs agent or customs office needs for this. The EU rules in this article do not apply to Switzerland.