The Author of the Article
To keep in mind
- The article explains the VAT exemption for importing goods that are destined for another EU country, also known as "customs procedure 42".
- The exemption allows the importer to avoid paying VAT at the time of importation, which improves cash flow and reduces administrative burden.
- The exemption requires the importer to provide certain information to the authorities, such as the VAT numbers of the importer and the customer, and the evidence of the transport of the goods to another EU country.
Importation of goods en route to another EU country (“customs procedure 42”)
According to VAT Directive, the importation of goods is exempted from VAT if followed by a supply or transfer of those goods to a taxable person in another Member State.
This exemption enables the importer to avoid pre-financing VAT at the moment of the importation.
Let's take an example
Your company imports goods from China. The goods are directly shipped to your Czech customer. There are two taxable transactions : 1) the importation of the goods and 2) the subsequent sale to your Czech customer.
VAT is normally due on the importation of goods unless the conditions to apply the "custom procedure 42" are met.
What are the conditions for applying the VAT exemption?
The conditions under which that exemption is granted are currently laid down by Member States. In order to fight tax fraud, the European Union Council has decided to specify, or particular transactions, at Community level, a set of minimum conditions under which this exemption applies. Exemption will be applicable only if at the time of importation the importer has provided to the competent authorities of the Member State of importation at least the following information:
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His VAT number issued in the Member state of importation (or the VAT number of his VAT representative).
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The VAT number of the customer, to whom the goods are supplied, issued in another Member State or his own VAT number issued in the Member State in which the dispatch or transport of the goods ends when the goods are subject to a transfer.
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The evidence that the imported goods are intended to be transported or dispatched from the Member State of importation to another Member State. However, Member State may demand that the evidence be indicated to the competent authorities only upon request.
Conditions have been implemented in all Member States since January 1st, 2011 (Council Directive 2009/69/EC of 25 June 2009)
The VAT expert's eye
According to European Court of Justice, the exemption from import VAT may not be refused in respect of an importer designated or recognized as liable for payment of that tax, in which, first, the recipient of the intra-Community transfer of goods effected after that import commits tax evasion in connection with a transaction which is subsequent to that transfer and is not linked to that transfer and, secondly, there is no evidence to support the conclusion that the importer knew or ought to have known that that subsequent transaction entailed tax evasion on the part of the recipient (ECJ, 531/17, VESTSCH, 14/02/2019)
Maximize the Benefits of Customs Procedure 42 with Our Tax Advising Firm
Customs Procedure 42 can provide significant financial and operational benefits for businesses importing goods into the European Union (EU) that are en route to another EU country. Our tax advising firm can help you maximize these benefits and ensure compliance with the procedure.
Here are some reasons why you should contact us:
- Our team of experts has extensive knowledge and experience in dealing with Customs Procedure 42, and can provide you with tailored advice and guidance to help you navigate the process.
- We can help you gather and prepare the necessary documentation and evidence to demonstrate that the goods are en route to another EU country, ensuring a smooth and hassle-free customs process.
- Our firm can provide you with ongoing support and advice to help you manage your cash flow and reduce your financial burden by deferring the payment of import VAT until the goods reach their final destination in the EU.
- We can also help you stay up-to-date with the latest developments and changes in the customs regulations, ensuring that you remain compliant and can continue to benefit from Customs Procedure 42.
Don’t miss out on the benefits of Customs Procedure 42. Contact our tax advising firm today to learn more about how we can help you maximize the benefits of this customs procedure.
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