Do You Pay VAT and Import Duty on Shipping Costs as well as Item Costs when buying from China? Explained.
Buying from overseas can be a tricky business, especially if you haven't done it before. It is also very hard to find the information that you require unless you are able to pay for advice from a solicitor. One of the most common things that happens when someone buys from overseas is that they do not realise that they are subject to some extra charges that they were not aware of when they bought their items. These charges are VAT and Import duty.
Buying from inside the EU is different from buying from outside the EU. If you are living within the EU and buying from outside the EU then you are subject to pay VAT at 20% plus import duty at variable rates. Import duty is charged based on product categories and can range from anywhere between 0% and 20%. Therefore it's very important that you take both of these in to consideration before making a purchase from a country from outside the EU, especially if you are doing so for business purposed and are looking to make a profit.
10 Important Consideration Before Buying From Overseas
- Check the Import duty rate on the item before a purchase.
- Ensure that the supplier / seller is going to declare the correct value on the invoice.
- Know which haulier is being used to deliver your items.
- Check whether the item is subject to VAT. Some items are not such as children's clothing.
- Create your own profit calculators that take into account all costs.
- Know your market. Will you be able to re-sell the items and make a profit even with the extra charges?
- For goods over £600 or for VAT registered companies you will need an Economic Operating Licence in order to ship into the country.
- Phone the haulier to make payment of VAT and Import duty before your goods arrive otherwise they will be taken back.
- Agree with the seller who will pay the additional charges.
- Appreciate that in most cases there is no such thing as a returns policy when you are buying from outside the EU. The shipping cost is normally too high to make this possible.
So why is VAT charged at 20%? It is charged in order to keep business within the EU. It ensures that countries from outside the EU are not able to compete with countries from within the EU on price. It is designed to look after the economy within Europe.
VAT @ 20% is charged at customs along with the import duty. Both the VAT and the Import duty are charged on the cost of the items, plus the shipping. Therefore if you were to buy some trainers for $100 and then it cost $20 to ship them, then you will be paying VAT at 20% on a total of $120, and Import duty at X% on $120.
Sometimes suppliers from countries like China will tend not write the correct invoice value of the goods declaration so that when it reaches customs you do not have to pay the full VAT and Import duty. As a business you do not want this to happen because your accounts will be completely out and it will actually show that you are making more profit than what you are depending on how much money has been under declared. On the other hand, if you are buying some trainers then it might work in your favour, but you should be aware that knowingly doing so is breaking the law.
Currently China is worlds fastest growing market and therefore many imports are being done from this country. Other countries that the EU are importing from include: Tawian, China, India, Pakistan, South Africa, USA, Russia, Turkey and Tawain.
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