Value-added tax on imports
As you know, VAT is due on all goods and services. For EU-based companies, VAT is chargeable on most sales and purchases within the EU. However, VAT isn’t charged on exports to countries outside the EU. In this case, VAT is paid in the country of import. There are three options to not paying VAT on imported goods namely:
- An article 23 licence
- A tax representative
- A bonded warehouse
Article 23 license
When goods are imported from a non-EU country, the value-added tax is due. Usually, a company would file an import declaration at Dutch customs. This value-added tax is deducted as input tax when a deduction is allowed. However, the value-added tax on imported goods can also be declared in the VAT tax return. In this case, an Article 23 License (also known as import VAT deferment license) is necessary. This means that no VAT is due at customs in The Netherlands; instead, the VAT is declared in the tax return.
The Main Advantage
The main advantage of this article 23 license is the freedom it provides. This license is, however, not easy to obtain without actual activities/clients in The Netherlands. With an Article 23 license, the import VAT is accounted for on the VAT return. This means that the amount of VAT due and the amount of VAT that can be deducted are settled at the same moment.
Another option to prevent VAT on imported goods is a so-called Tax Representative. You can appoint a Tax Representative in The Netherlands when you are a foreign entrepreneur. This representative will handle your business with the Tax and Customs administration. This means the Dutch B.V. doesn’t have to be filed as a VAT withholding company. The tax representative can take care of the following:
- Filing the VAT return
- Filing the ICP declaration
- Applying the reverse-charge mechanism to import
This representative must at least meet the following requirements:
- Based in The Netherlands
- Providing the financial security for VAT
The Main Advantage
The main advantage of a tax representative is the fact that the fiscal representative takes care of all the requisites with taxation with knowledge regarding the EU guidelines.
In a bonded warehouse, non-EU goods can be stored. A bonded warehouse is also known as a freezone. This location has to be approved by the Dutch customs and is under the control of the Dutch customs. The imported goods can be stored for an indefinite duration, until the goods are placed under a customs regulation, get destroyed or leave the customs area of the EU.
No import duties or other taxes are due on the imported goods. The bonded warehouse can be used as a distribution centre.
The Main Advantages
The main advantages of a bonded warehouse are:
- No customs duties are due when most of the goods are imported to countries outside of the EU
- Payment of customs duties and VAT can be postponed
However, there are also disadvantages to a bonded warehouse. The main disadvantage is the fact that it may be harder to find a distribution partner.
Normally, VAT is due on all goods and services imported from outside of the EU. In this article, we discussed three options: the article 23 licence, the tax representative and the bonded warehouse, and their advantages and disadvantages. If you wish to know which option suits your company best, please contact us for a consultation.