Import VAT is a tax charged on goods being imported into the EU and the UK. It’s a percentage rate calculated on the CIF value (customs value) of the goods.
Essentially, import VAT is the VAT (Value Added Tax) you pay on imports. VAT is a consumption tax that’s applied at every stage of a product’s lifecycle. It’s added as a percentage onto the net value of goods and services. Each country sets its own VAT rates, and usually, they’ll have more than one rate:
Some goods and services are exempt from VAT. Like zero-rated, there’s no VAT payable, but unlike zero-rated, there’s also no reporting requirement.
Both the EU and the UK use VAT and apply it to imported goods. For example, you import a desk lamp into the UK. You’ll have to pay import VAT at the rate that the UK applies to desk lamps.
The person responsible for paying the import VAT and any customs charges is the Importer of Record (IOR). They’re legally responsible for making sure shipments have all the necessary documents and meet the destination country’s laws. Typically, the IOR is one of three people:
In ecommerce, the IOR is usually either you, the seller, or your customer. Making your customer the IOR means you can avoid the import VAT and the associated compliance procedures. However, it is a much worse customer experience. We really only recommend making your customer the IOR if it’s a one-off. When sellers are the IOR, cart abandonment and checkout hesitancy rates improve.
Unless the goods you’re importing are zero-rated or exempt, someone will have to pay import VAT on the import. If you’re the importer of record, the responsibility falls to you.
In certain circumstances, you might not have to pay import VAT when importing goods into the UK. If you import something temporarily, you might be able to claim import VAT relief. For example, importing an artwork that will be displayed in a temporary exhibition and then returned to its country of origin.
In most cases, the IOR will have to pay import VAT when importing goods into the EU. There are some exceptions:
IOSS is an EU VAT scheme, designed to make selling goods online to the EU a bit easier. Goods shipped into the EU under IOSS don’t have import VAT charged at the border. Instead, the consumer pays VAT at checkout when they place their order.
Regime 42 allows you to import goods into the EU without paying import VAT under two conditions:
Your customer uses the reverse charge mechanism when they receive the goods.
In France, the use of limited fiscal representatives for Regime 42 is ending. That means you won’t be able to use this customs procedure without registering for VAT in France or making your customer the IOR.
Aid imported into the EU for distribution in Ukraine, or to Ukrainian refugees, is currently exempt from import VAT.
Import duties are calculated based on the customs value or CIF Value. This is the total cost of the product before it arrives at customs, including the insurance and freight (hence CIF).
There are lots of different kinds of duties (from tariffs to dumping duties), but not all apply to every product. Which applies to your goods depends on their HS Codes. These codes are internationally recognised trading codes, which classify goods by category.
Ad Valorem duties are the most common type. They’re percentages calculated on the CIF value. Specific duties can be flat fees but tend to be fixed amounts by quantity, volume, or weight (i.e. £1 per 1 litre).
Finally, import VAT is calculated based on the CIF Value plus any duties.
You import a product from the USA to the UK.
The goods are valued at £1000, and the shipping and insurance came to £100. Together, this gives us the CIF value: £1100.
There’s a 5% duty rate on your goods, so we apply that first: £1,100 × 5% = £55
The goods are standard rated for VAT, so then we add 20%: (£1,100 + £55) × 20% = £231
The total cost is: £286 (£55 in duties and £231 in VAT).
Import duties and VAT are different. They’re both taxes paid on imported goods, but they work slightly differently and are calculated differently. One big difference is that if you’re registered for VAT, you can reclaim the import VAT on your VAT return. You can’t reclaim import duties.
How much you pay will depend on:
VAT is a percentage calculated on the CIF value of the goods, plus any import duties. Most countries have more than one VAT rate. Which applies to your goods will depend on their HS codes. For example, in Germany, the import VAT rate could be 19%, 7% or 0%.
The UK has three VAT rates:
Which applies to your shipment will depend on its HS codes. The total amount will equal: (CIF Value + Duties/Tariffs) x VAT Rate. For example: (£1000 + £200) x 20% = £240
Import VAT is paid to the customs authority in the destination country. In the UK, this is HMRC and is done through the customs declaration. In the EU, the customs authority will depend on the member state where your goods enter the customs union.
You might need to register for VAT or one of the EU’s VAT schemes if:
You’ll also need either an EU or UK EORI number.
Usually, import VAT becomes due when the goods enter the customs territory of the destination country. Some countries (like the UK) allow VAT-registered businesses to delay their import VAT payments. This is called Postponed VAT Accounting (PVA) and can help you manage your cash flow if you have lots of imports.
The UK also lets you defer paying your customs and excise duties if you get a duty deferment account.
If you’re registered for VAT in the country where you’re being charged import VAT, you can reclaim it. You do this by reporting the amount on your VAT return.
Import VAT and VAT you’ve paid on business supplies are offset against VAT you’ve collected on sales to that country. If the VAT you’d paid is more than the VAT you’ve collected, the difference will be refunded to you.
You have to have the C79 certificate to reclaim import VAT in the UK, unless you’re using postponed VAT accounting. If you postpone your import VAT payments, you’ll need the monthly PVA statement from HMRC instead.
You don’t need a VAT number or to be VAT registered to import goods into the UK or EU. However, if you’re registered for VAT in the country of import, you can reclaim the import VAT on your return.
Postponing import VAT means paying it later, through your VAT return. This is called postponed VAT accounting and can help you manage your cash flow – especially if you import a lot. You have to be registered for VAT in the country where you're bringing goods in. Not all countries allow for postponed VAT accounting, but in France, it’s mandatory.
