The Author of the Article
EXW, FCA, DAP or DDP? Knowing the Incoterm is useful but not enough to determine the VAT treatment of your transaction.
When businesses buy or sell goods internationally, one of the first questions asked is often “What is the Incoterm?”
It is an important question — but from a VAT perspective, it is not the most important one.
For VAT purposes, what really matters is understanding the physical flow of the goods, the contractual supply chain and, crucially, who is acting as importer or exporter for the relevant VAT and customs purposes.
And this is where we regularly see problems.
Customs and VAT do not necessarily speak the same language
The party identified as importer or exporter in the import/export process does not automatically determine the VAT treatment of the underlying transaction.
A company can therefore have a perfectly valid customs declaration while the VAT treatment of the commercial transaction is wrong.
This distinction becomes particularly important when goods:
- leave the EU;
- are imported into one EU Member State before being delivered to another;
- are sold through several companies while being transported only once;
- are delivered directly to the end customer;
- are cleared through customs by a freight forwarder or customs representative; or
- move between warehouses or entities within an international group.
Importer of record: who is actually importing for VAT purposes?
Import VAT is not simply a customs cost. Identifying who is liable for the import VAT and who may be entitled to deduct it is fundamental.
A frequent mistake is to assume that because a company's name or VAT number appears somewhere on the customs documentation, that company can automatically recover the import VAT.
That conclusion can be dangerous.
The import must be analysed together with the underlying VAT transaction. Otherwise, businesses can face non-deductible import VAT, unexpected VAT registrations, assessments and penalties.
Exports present the same challenge
An export customs declaration does not, by itself, answer the VAT question either.
For an EU supplier to treat a transaction as a VAT-exempt export, the VAT conditions for the exemption must be satisfied and the business must be able to connect the commercial supply with the actual export of the goods.
Who sells the goods? Who arranges the export? Who appears in the customs documentation? And can the supplier demonstrate that its supply qualifies for the VAT exemption?
These questions become particularly sensitive with EXW sales, indirect exports and transactions involving several parties.
The expert’s eye
Review the flow before the Tax Authorities do
If your company regularly imports, exports or moves goods across EU borders, a relatively simple review of your principal flows can identify significant VAT risks — and often opportunities for simplification.
At Ryan, we review the complete transaction: Purchase order → contractual supply → Incoterm → physical movement → customs declaration → importer/exporter → VAT treatment → invoice → VAT reporting.
The objective is simple: make sure your logistics, customs documentation and VAT treatment tell the same story.
Because when they don't, the discrepancy is often discovered during a VAT or customs audit.