Public consultation on 2024-introduced import VAT mechanism
In January 2024 new France import VAT deferment rules were introduced. This enabled regular importers to boost their cash flows by avoiding import VAT payment at the point of goods clearance into France.
A new public consultation has now been launched by Direction générale des finances publiques (DGFiP). This invites comments on several developments relating to value added tax (VAT) on imports introduced by Article 112 of Law No. 2023-1322 of 29 December 2023 on finance for 2024.
The following rules are the subject of a public consultation from July 24, 2024 to October 1, 2024 inclusive to allow interested persons to address their possible comments to the administration:
- Shifting of the collection of import VAT from the customs administration (Direction générale des douanes et droits indirects, DGDDI) to the tax administration DGFiP; and
- Treatment of liability for VAT of certain resellers selling imported goods online from stocks held by a supplier established outside the European Union (so called “dropshipping”) if the declared import value doesn’t match the actual selling price.
2024 import VAT changes
The rules on the liability of import VAT were adjusted as follows:
- in order to take into account recent developments in e-commerce practices, certain taxable resellers who make distance sales of imported goods when there is a discrepancy between the tax base declared on import and the real commercial value of the imported goods are now liable for VAT due on import.
- with regard to flows between taxable persons or when the import is carried out in the absence of any delivery, and in order to remove any ambiguity between tax and customs terminologies, the rules on the liability of import VAT are rewritten with a direct reference to the concepts from the Union Customs Code (Regulation (EU) No 952/2013 of the European Parliament and of the Council of 9 October 2013 establishing the Union Customs Code).
EU import VAT deferment option
The EU import VAT deferment rules allow businesses to defer the payment of import Value-Added Tax (VAT) to a later date rather than paying it immediately at the time of import. This system is designed to improve cash flow and simplify VAT management for businesses importing goods into the EU.
Key Aspects of EU Import VAT Deferment:
1. Deferral Mechanism:
– Import VAT can be accounted for through the importer’s periodic VAT return instead of being paid at the point of importation.
– This mechanism enables businesses to declare and recover import VAT simultaneously, eliminating the need for an upfront payment.
2. Eligibility:
– Import VAT deferment is available to VAT-registered businesses in EU member states.
– Importers must comply with specific requirements set by individual member states, which may include maintaining a good compliance record and providing financial guarantees.
3. Application Process:
– Importers typically need to apply for authorization to use VAT deferment with the relevant tax authorities.
– Some member states may require the importer to meet additional criteria or provide a security deposit.
4. Implementation by Member States:
– Not all EU member states offer VAT deferment schemes; those that do may have differing conditions and procedures.
– Examples of countries with VAT deferment schemes include the Netherlands, Belgium, and the UK (following Brexit).
5. Benefits:
– Enhanced cash flow management as businesses avoid the need to pre-finance the VAT.
– Simplification of accounting processes, as import VAT is handled through the regular VAT return cycle.
6. Compliance and Record-Keeping:
– Businesses must maintain accurate records of imports and ensure compliance with both national and EU VAT regulations.
– Periodic audits may be conducted to ensure adherence to the deferment rules.
By deferring VAT payments, the EU aims to facilitate international trade and support the liquidity of businesses engaged in importing goods into the European market.
