How to calculate VAT and import duty
Goods imported from outside the European Union must be cleared in order to be ‘nationalised’ (there are exceptions depending on the purpose of the import, i.e. the tariff to be applied, for example, inward or outward processing, temporary admission, etc.).
As a result of customs clearance, the importer will have to pay VAT and duty but what are the calculations for these taxes based on?
The origin of the goods and the Combined Nomenclature
The first step is to identify the origin of the goods and classify them according to the Combined Nomenclature of the TARIC system (the European Union’s integrated tariff system).
The tariff heading indicates the tariff and VAT percentages to be applied. It also indicates other requirements to be fulfilled such as proof of import licence, prior inspection services (SOIVRE: the Spanish official export inspection service, pharmacy, etc.) and presentation of original documents along with the SAD, etc.
The supplier will usually provide the tariff heading. However, we always recommend our importing clients to review the information provided to them with their customs agent in order to prevent clearance problems.
The customs value or Cost, Insurance and Freight (CIF) value of the goods
Once we have identified the origin and the tariff heading we can then determine the customs value or the CIF value of the goods. The tariff percentage can then be applied to this figure to obtain the import duty amount.
Using these values, we can then calculate the VATable amount which is the sum of the following:
- Customs value.
- Import duty.
- Port charges (T3).
- Unloading and handling (THC).
We can then apply the VAT percentage to the VATable amount.
EXAMPLES OF CALCULATING TAXES ON IMPORTS
Here are some examples to illustrate the theory.
By Blanca Romeu