Incoterms / DDP / responsibility for VAT

So, as I feared, our customers are pushing for DDP

Didn't find your answer?

Our EU customers (for our UK manufactured machinery) are pushing for all deliveries to be made on DDP basis.

Thus, we would be responsible for all shipment and clearance costs (not dissimilar to DAP that we have worked with).

BUT - would I be correct in assuming we would also be on the hook for the import VAT charged in the country of arrival?

Presumably any possible reclaim of the VAT would be an absolute pig too!

Replies (11)

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VAT
By Jason Croke
14th Jan 2021 13:36

DDP puts the import VAT on you, the seller.

So the freight agent will pay the EU import VAT and recharge back to you, but not recoverable on UK VAT return and not recoverable with the EU authority unless you are VAT registered there.

You might want to explore registering for VAT in France or Netherlands (depending upon your freight agents usual route into Europe, if by lorry it'll either be Rotterdam or Calais), obtain an EU EORI number and then you can reclaim the import VAT on your EU VAT return and the subsequent sale will go on your EU VAT return.

There is also this company called Europa Flow that for £49 per shipment have a system which treats the import into EU as an intra-EU supply and the customer reverse charges the VAT.
https://flow.europa-worldwide.com/overview/

I'm not recommending them but they offer a unique solution. Even if you just call them and sound them out, you might get a better understanding of what they offer or might spark other ideas off in your head.

I can send you their price list and their "how we do it" .pdf so PM me if you want those as I can't attach to this post.

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Replying to Jason Croke:
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By tom123
14th Jan 2021 13:39

So there will be no process a bit like you could previously use for EU vat on expenses then?

As it happens, for other reasons, we now have an IE entity - but that is not VAT registered and was intended for standard approving, rather than trading.

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Replying to tom123:
paddle steamer
By DJKL
14th Jan 2021 14:00

Just think of the plus points, all your visits to the foreign subsidiary, to review its accounting practices etc, will now become tax deductible trips- just ensure you set up somewhere pleasant.

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Replying to DJKL:
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By tom123
14th Jan 2021 14:05

I've never been to Dublin as it happens :)

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Replying to tom123:
VAT
By Jason Croke
14th Jan 2021 14:35

I suppose we do have the 13th Directive route but would require submitting a claim to the EU member state (paper forms in their language unless you use a VAt reclaim firm like Way2VAT or similar) and can often be months before refunded, so cashflow issues potentially?

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Replying to Jason Croke:
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By Echo761
21st Jan 2021 09:25

Is there not a problem if you are making supplies in that country, then they will not be refunded?

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Replying to Jason Croke:
A Putey FACA
By Arthur Putey
14th Jan 2021 15:24

Its worth looking at this from the other country's VAT perspective. Some EU countries/customers may be able to use VAT deferral so they won't necessarily have to pay VAT when the goods clear customs. The UK is late to the party with its own deferral scheme.

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Replying to Arthur Putey:
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By tom123
14th Jan 2021 15:41

I am hoping that our customers (generally global manufacturers) issued all these decrees in anticipation of no deal, and now that there is a 'deal' as such, we might be lucky.

Really don't want to end up VAT registered in all our customer countries!

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Replying to Jason Croke:
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By Rgab1947
26th Jan 2021 09:41

We are out of the EU so why are we still having to comply with EU VAT. Or is it a misunderstanding that we are out of the EU so we do not have to register for VAT in EU same as China/USA etc.

We trade on INCO terms

My understanding is exporting to the EU is at 0% as a foreign export. When we were part of the EU foreign imports attracted an import VAT that the importer paid and then reclaimed.

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By Echo761
21st Jan 2021 09:24

If you are the importer of record, under DDP - then you are making a supply of the goods in that country. As most EU countries have a nil VAT registration threshold for non-established suppliers then you would have to register for VAT there. Not a choice, as I understand it. Then you can either recover the import VAT or use postponed VAT accounting (if available in that country). Bear in mind in 19 of the EU member states you also need a fiscal rep to submit the returns.
So need to register in each country where you make supplies until the OSS kicks in on 1/1/21?

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By Rgab1947
26th Jan 2021 09:37

Trade deal meant no duty, right?

Import VAT paid into the EU importing country is reclaimable by the EU customer. UK charges 0% VAT on exports.

Why having to register for VAT in EU. Do all USA/China/Australia etc. companies have to register for VAT in EU? Think not. None did here when we were in EU.

Same with VAT being charged to UK customers. If B2C under EU rules VAT charged. Under foreign exports its 0% to both B2C and B2B with VAT upon import in UK. Considering most EU countries charge 23% there should be a reduction.

So are UK customers being ripped off (yet again)

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