What is an EU customs clearance?
Under an EU customs clearance is understood the import customs clearance in the EU country of entry (transit country) with subsequent tax-exempt intra-Community delivery in another EU country (country of destination). In the EU country of entry no import turnover tax is levied in these cases on imports. With the EU customs clearance exporters receive from third countries (eg Switzerland) “EU status”. This means that they can benefit from the advantages of intra-European trade in your exports to the EU, as well as each of their EU competitors.
The following requirements must be met for the application of EU customs clearance:
– The exporter has in the first country of entry of the EU itself a tax identification number (USt-IdNr.), i.e. he is in the EU country of entry registered for VAT purposes or he uses the VAT ID number of a fiscal representative in the EU country of entry
– The customer owns and uses compared with the exporter a VAT ID number., which was granted to him by another EU country
– The exporter is liable to pay the import tax in the EU country of entry, i.e. he acts as an importer.
What sales tax consequences arise from EU customs clearance?
The sales-tax consequences of an EU customs clearance will be clarified by the following example.
The Swiss supplier A is registered in Germany for VAT purposes and has a German VAT ID number (alternative: A can be represented in Germany by a tax representative C). A supplies goods from Switzerland via Germany to the Austrian customer B. B has an Austrian VAT ID No. Due to the agreed delivery term DDP, customs and taxes [A assumes the costs for the transport and import duties to destination (Austria). The risk of loss or damage to the goods also takes A to destination.], A imports the goods in his own name in Germany.
a) Transport of goods from Switzerland to Germany
It follows a customs clearance of goods in Germany (release for duty and tax free circulation). Since the goods do not remain in Germany, no import turnover tax is levied.
b) Delivery of goods from Germany to Austria
Value-added tax point of view the delivery of A to B is carried out in Germany because A is debtor for the import VAT (importer). The delivery is exempt from tax as intra-Community delivery if the tax exemption can be demonstrated in book and receipt form. The delivery has A resp. C (with claims of the fiscal representative C) to declare in his German advance VAT return and in the summary message. In addition, the delivery of the Intrastat declaration (dispatch) is indicated if the reporting threshold, currently € 500’000 (in Germany) per year is exceeded. In the statement A has to specify its VAT ID number and the VAT number of the client. Furthermore, in the invoice it should be pointed to the tax-exempt intra-Community delivery.
c) Income is taxed by B in Austria
B has taxable intra-Community acquisitions in Austria for the delivery of A. The transfer tax can B assert as input tax as part of its deduction rate. B reports the intra-Community acquisition in his Austrian advance VAT return and by exceeding the reporting threshold in the Austrian Intrastat declaration (input).
Advantages and disadvantages of EU customs clearance compared to the conventional import into the EU
If a European company imports goods from a third country (eg Switzerland) in the conventional way, and reports these goods for “free circulation” in the EU, import VAT has to be paid for the goods. In large amounts, this can lead to liquidity problems. In the EU customs clearance no import turnover tax is levied. According to information of forwarding agents customs clearance fees are minimized as costly customs clearance in the destination country are avoided by the EU customs clearance. As a result of the subsequent payment of the national transfer tax (through the taxation of intra-Community acquisition in the country of destination), the customer has a cash advantage.
If a company imports goods from the third country (eg Switzerland) as part of the EU customs clearance, it must demonstrate the tax exemption of intra-Community delivery in book and receipt form. If the tax authorities, for example, discover that the recorded VAT ID No. of the customer was not valid (accounting evidence), the import turnover tax must be recovered from the customs office. The importer (= supplier) therefore bears the risk of proving the exemption. This also includes the documentary proof that the goods from one EU country has been transported to another EU country (eg Germany).
Another problem is that often the EU customs clearance is registered, even though the statutory prerequisites for this are not available. In most cases, it fails on the condition that after the import an intra-Community delivery take place.
If the conditions of application are not given as EU customs clearance, the import has to be made in the “normal” process in which the Customs collects import duties.
Cases where an EU customs clearance is not permitted (not finally):
The Swiss supplier A is registered in Germany and has a German VAT ID number. He sents an item for repair from Switzerland to the subcontractor B in Austria. A imports the subject in Germany. There is no intra-Community delivery after the import. A delivery requires that the receiver gains the economic power of disposal to the article. This is not the case here. The object remains in the power of disposal of A. It is only left for B for repair. Imports in Germany is subject to German import sales tax.
Experience has shown that in such cases is often made an EU customs clearance using the VAT ID number of the outward processor. This is not allowed.
Factory Contractual Delivery:
The Swiss supplier A is registered in Germany and has a German VAT ID number. He delivers a fully operational equipment at B in Austria. In the scope of delivery is Included the installation and commissioning. A imports the parts of the equipment in Germany and delivers it to Austria. There is no intra-Community delivery after the import. Object of delivery is the operational equipment and not the individual system components. The delivery is taxable in Austria, since there the equipment will be built. The import of the equipment parts in Germany is subject to German import sales tax.
Experience has shown that in such cases is often made an EU customs clearance using the VAT ID number of the customer. This is not allowed.
For whom is an EU customs clearance of particular interest?
The EU customs clearance is particularly of interest for Swiss companies who export goods to many EU countries. The VAT registration (or representation by a tax representative) shall be carried out in an EU country that shares border with Switzerland. The VAT registration should not be made in the main exporting country (eg Germany), but in another neighboring country, i.e. in France, Austria or Italy, because with the VAT registration in the main exporting country, the EU customs clearance is not possible.
Source: OSEC, Swiss Vat AG, Markus Fuchs