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)
Good to know
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)
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