This blog was last updated on January 10, 2024
Businesses that trade cross border must turn their attention to the treatment of goods post-Brexit. Recently, we discussed postponed import VAT accounting in the UK. This week, we’re turning our attention to postponed import VAT accounting in the EU.
Deferred and postponed accounting for VAT post-Brexit
In theory, when goods enter the EU, import VAT is immediately due to the customs authorities at the relevant border. In practice, the EU VAT Directive gives Member States the ability to determine the conditions under which goods enter their territories. This is in addition to the ability to set detailed rules for payment of VAT in respect of goods imported. This means Member States can implement mechanisms for postponed accounting via the VAT return, or deferred payment schemes, or a combination of both.
Postponed accounting via the VAT return accounts and pays for import VAT due in the taxpayer’s periodic VAT return. If import VAT is deductible, it is recoverable on the same return. This creates the benefit of neutral cashflow impact as a result. Effectively, this accounts for VAT in a similar way as acquisition tax, in that there is no physical payment of VAT to the revenue authority.
Member States are able to determine the specifics of their own deferment scheme, which may apply to every importer or be limited to certain cases.
What’s the picture in the EU?
- In the Netherlands, Article 23 of the VAT Law grants the ability to postpone import VAT to the VAT return. However, to apply for an Article 23 licence directly, a business must be established in the Netherlands. It’s still possible to benefit from Article 23 without being established, if the services of a fiscal representative are secured. Fiscal representation in the Netherlands is limited or general; limited doesn’t require the importer to obtain their own VAT number and can only be used for certain transactions. In contrast, general fiscal representation does involve the importer obtaining their own VAT number. This is then managed by the fiscal representative and offers significant flexibility on how the goods may be used after the initial importation.
- Germany has deferred import VAT accounting, which offers the possibility for some importers to apply a deferred payment scheme to mitigate the cost of an immediate payment of import VAT. That said, it may be necessary to have a bank guarantee to access the scheme. Any import VAT will be deductible on the VAT return covering the date that the import took place.
- Belgium allows for the postponement of import VAT payment to the VAT return after successful authorisation of licence E.T. 14.000. The authorisation isn’t subject to a guarantee, and UK businesses can use the VAT deferral licence if they file periodical VAT returns.
- France allows non-EU businesses who have a fiscal representative with Authorized Economic Operator status to apply for postponed accounting via the VAT return. This is through the request of a specific authorization to the Customs Authorities which, once approved, is valid for up to three years. Important to note is that the Customs Authority will be relaxing this requirement from 1 January 2021 so any business can apply for postponed accounting.
- Portugal has been implementing a postponed accounting scheme since 2017. It’s subject to the meeting of specific conditions and requires businesses to make a specific application to use the scheme. Crucially, it involves the submission of monthly VAT returns on an ongoing basis. This has a knock-on impact on compliance costs.
- Spain’s postponed accounting system enables importers to declare the import VAT due through their periodic VAT return. Therefore avoiding payment of VAT at the time of import. However, postponed accounting only applies to taxpayers filing monthly VAT returns. Doing so in turn leads to an obligation to file declarations under the Immediate Supply of Information (SII) regime. SII requires continuous reporting of detailed transactional data within four business days. Given these additional reporting requirements and potential penalties for non-compliance, businesses must then carefully consider whether the use of postponed accounting is beneficial.
What next?
Import VAT can create significant cashflow issues. To mitigate this it’s essential to be aware of available reliefs. Therefore post-Brexit, make the necessary application for deferred or postponed VAT accounting in the country of import.
For more post-Brexit related content:
Goods, Services, and VAT Recovery Post-Brexit – What do Businesses Need to Know?
UK Border Controls Post-Brexit – What you Need to Know About Importing Goods
