As a general rule, VAT due on goods imported into the European Union (EU) is paid to the customs Authorities. This VAT will be considered as deductible in subsequent VAT return (1).  VAT is neutral in the end but can affect cash flow significantly for the period of time from the VAT payment to its actual recovery.

Based on article 211 of the European directive 2006/112, the Member States may provide that import VAT will not be paid at the time of the import if it is reported as such in VAT return. Around 20 Member States introduced this system in their domestic legislation with the notable exception of the United kingdom and Germany (2)

Taxation of the imports via the vat return is in fact like the reverse charge mechanism: import VAT is not paid but simply reported as VAT due in the VAT return. VAT deduction will be reported for the same amount as well (1).

This taxation scheme that neutralizes any cash impact may give a substantial financial advantage to the businesses and more generally represents an attractive element for the Member States where it is implemented. However, this taxation must be widely open, without creating too many operational constraints. In this respect, prerequisite and operating conditions significantly differs from one country to another.

This entails to consider if any other domestic or European provisions avoiding payment of the import VAT. Also bearing in mind that the system of deferred payment of import taxes (including VAT) provided in most of the EU countries under conditions may be also a simple solution to reduce cash flow impact greatly.


(1)  As long as the importer is entitled to recover 100% VAT

(2)  Taxation of import similar to what is proposed by article 211 may be in regulation of countries outside the European Union.

(3)  In this respect it is necessary to check among others whether the importer needs to post guarantee for getting deferred payment scheme