In a B2B supply chain, the Importer of Record (IOR) pays the import VAT to the local tax authority – as determined by the Incoterms.
If you are supplying to a VAT registered EU business, for example a distributor or your end customer is a business, they should be able to account for VAT on the import either through a postponement or deferment mechanism, so the impact on them will be minimal.
Not all customers want to be the Importer of Record, however, as it can bring other responsibilities such as ensuring the goods meet EU standards and specifications. It also increases the cost of goods if there is a liability to pay customs duty, so suppliers need to factor in how much their customer is willing to pay.
It could be therefore, that you decide, or your customers demand, that you as the supplier takes on the IOR role and Incoterms are Delivered Duty Paid (DDP). In this case, you as the supplier will be liable for import VAT and any customs duty.
As a UK supplier you may therefore need or benefit from obtaining a VAT registration in the Member State of import to allow you to reclaim this VAT. The circumstances when you would need an EU VAT Number are as follows:
- If you are buying and then selling goods in an EU country
- If you are importing goods into an EU country in your name, which can include moving goods across national borders within the EU
- Hold goods in warehouses or on consignment stock in EU countries for customers, for example using Amazon’s Pan European Fulfilment
- Sell goods to consumers over the internet or through catalogues (distance selling). More of which in a moment.
If you import into more than one EU country directly from the UK, supplying directly to consumers you would need a VAT registration in each country.
If, however, your goods are always imported into one country, for example the Netherlands, and are then distributed around the EU, you could elect to clear all goods in the Netherlands first. They would then be eligible for free circulation around the whole EU. In this circumstance you would just require a VAT Number in the Netherlands. VAT would still be charged to consumers, but B2B customers would not.
This is a potential simplification, but of course it could incur additional transport costs as compared to sending directly from the UK to Italy, for example, or holding stock in each country.
Many companies are looking closely at The Netherlands as an option to route their imports into the EU as it offers one of the most progressive VAT deferment regimes for non-resident importers of goods into the European Union. This includes two principal schemes to reduce or eliminate the import Dutch VAT due. Both involve appointing a VAT fiscal representative, who is responsible for all reporting of VAT or the movement and goods.