Incoterms® - VAT Implications for Cross-Border Trade

Find out what Incoterms are and how they affect VAT in the EU in our latest infographic.

Cross-border businesses need to ensure VAT compliance to meet the requirements of each country. The complexity of international VAT affects different elements of the supply chain. The potential risks, fines and costs can cause headaches for businesses.

VAT determination for goods requires an understanding of when goods move across a border and also if the supplier or customer is responsible for this movement.

So complications around who is responsible for VAT can arise. The International Chamber of Commerce (ICC) introduced a set of international commercial terms – otherwise known as Incoterms. This set of internationally recognised rules define the responsibilities of buyers and sellers in international transactions.

The 11 Incoterms define who is responsible for each element of the sale of goods. This includes documentation and customs clearance, shipment, and insurance.

In a Post-Brexit environment, businesses with EU and UK trade no longer trade intra-EU and are therefore subject to import and export rules. Contracts for the supply of goods within the EU usually mention Incoterms. Although they don’t determine the correct VAT treatment of a movement of goods, they’re helpful in understanding the intentions and responsibilities of both buyers and sellers.

Failure to understand how VAT relates to Incoterms within international contracts can cause delivery delays, possible penalties and interest for late registration and late payment of VAT as a result.

Our Incoterms infographic provides insight into the VAT implications for cross-border business and covers topics including:

  • What are Incoterms?
  • Which Incoterms affect VAT in the EU
  • In addition to examples of Ex Works (EXW) and Delivered Duty Paid (DDP) scenarios

There are obligations, costs and risk associated with the transport of goods and who is responsible for VAT at each stage. Ex Works and Delivered Duty Paid apply to all modes of transport – road, rail, air and sea.

Compliance peace of mind with a complete, global VAT Managed Service from Sovos

Whatever your VAT implications, Sovos has the expertise to help you navigate Incoterms and the complexities of cross-border tax obligations. Our VAT Managed Services ease your compliance workload while mitigating risk wherever you operate today. In addition, we ensure you’re ready to handle the VAT requirements in the markets you intend to lead tomorrow.

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