This article is applicable to persons holding a regular VAT number and carrying out a commercial activity (i.e. sole proprietorships, simple partnerships, partnerships and corporations).
That said, “private” users who start marketing without regularizing themselves in the eye of the tax authorities are not considered.
Imports, exports and intra-community sales
Since 1993, the application of the concept of export and import has undergone an important change as it has been limited only to trade with countries not belonging to the territory of the European Community, such as China, while, for trade between EU states, the “INTRASTAT system” has been inaugurated.
This system is aimed at recording the movement of goods within the Community only; while as regards fiscal controls at the external frontiers of the Community, it is still necessary to carry out checks at the competent customs offices.
What is meant by import from a tax point of view
As far as imports are concerned, it is important to know that the tax legislator, for VAT purposes, has introduced a so-called “destination” taxation principle. This means that, pursuant to art. 1 of the VAT Decree (Presidential Decree 633/72), the Value Added Tax applies “on imports made by anyone”, i.e. on the introduction, into the territory of the Italian State, of goods:
- from countries or territories not included in the territory of the European Community (i.e.: China);
- which have not already been released for free circulation in another Member State of the European Community, in which case their introduction gives rise to an intra-Community acquisition;
In particular, the following transactions listed in art. 67 of Presidential Decree no. 633/1972:
- Permanent import
- Release for free circulation
- Inward processing
- Temporary admission
- Release for consumption of goods from Mount Athos, the Canary Islands and the French overseas departments
- Outward processing traffic
- Reintroduction of goods previously exported outside the Community
On the other hand, the following are excluded from the scope of VAT, pursuant to art. 68 of Presidential Decree 633/1972, the following operations:
- Usual exports
- Imports of free low-value samples marked
- Permanent importation of goods the supply of which is exempt
- Reintroduction of duty-free goods
- Imports of goods to public bodies or associations with social purposes
- Imports of the goods indicated in paragraph 3, letter l), of art. 2 of the VAT Decree
- Gas imports
Let’s now focus on the most common case: the definitive importation, i.e. when the good purchased from a non-EU country, for example China, is released for final consumption to be sold in the territory of the European Union.
The permanent import procedure: What happens at customs
Let’s say, for example, that a company or a professional (both with a regular VAT number) purchases goods from a supplier who resides in a country outside the European Union. In this case, we are dealing with an import that is subject to VAT pursuant to the aforementioned Article 1 of Presidential Decree no. 633/72 (VAT Decree).
VAT is paid by the importer at customs when the imported goods are cleared through customs; this operation must be proven by a document – the so-called customs bill – on which the amount of customs duties and the amount of VAT are recorded, both to be paid to Customs.
How do you calculate customs duty?
The customs duty must be calculated by applying a percentage (required by law) on the so-called “customs value” of which we will explain the calculation later.
The customs duty varies depending on the type of goods imported and is calculated based on the value of the product purchased, described in the invoice presented to customs.
In particular, in shipments that have the European Community as their destination, the duty corresponds to the Integrated Community Tariff (TARIC) which is calculated as a percentage according to the commodity tables introduced by Reg. (EEC) no. 2658/87 at the first customs of entry into the Union.
How do you calculate VAT due on imported goods?
Pursuant to Article 69 of Presidential Decree no. 633/1972: the tax (VAT ed.) is commensurate, with the rates indicated in art. 16 (of the same Decree, ed.), to the value of the imported goods determined in accordance with the provisions on customs matters, increased by the amount of customs duties due, with the exception of VAT, as well as by the amount of the costs of forwarding to the place of destination within the territory of the Community which appears on the transport document under whose escort the goods are introduced into the same territory ».
The VAT taxable amount, on closer inspection, is therefore equal to the value of the imported goods, determined pursuant to customs provisions (so-called “transaction value” or “customs value”), increased by the amount (Article 69, paragraph 1 of Presidential Decree 633/72):
- customs duties due;
- the costs of forwarding them to the place of destination within the European Community, as shown in the transport document issued with the goods thus introduced
In most cases, VAT can be deducted (on a large scale) from this formula:
VAT value= [(value of goods + value of shipping costs)*(1+Duty)]* VAT of the country of destination
Limitations on the determination of the customs value as the transaction value and the normal value method
The customs value of the goods, as defined above, cannot be determined on the basis of the price actually paid or payable, if:
- there are restrictions on the supply or use of the goods by the purchaser, other than those which are imposed or required by law or by the public authorities of the European Community;
- the sale or price is not subject to conditions or performance the value of which cannot be determined in relation to the goods to be valued;
- no part of the product of any subsequent resale, transfer or use of the goods by the buyer returns, directly or indirectly, to the seller, unless an appropriate adjustment can be made;
- the buyer and seller are not related to each other or, if they are, the transaction value is acceptable for customs purposes
If the customs value of the goods cannot be determined on the basis of the value of the transaction, reference must be made to the so-called “normal value”, i.e. to:
- transaction value of identical goods;
- transaction value of similar goods;
- value based on the unit price corresponding to sales in the European Community of imported goods or identical or similar goods made to persons not related to the sellers (so-called “deductive method”);
- calculated value, equal to the sum:
- – the cost or value of the materials and manufacturing or other operations used to produce the imported goods;
- – an amount representing profits and overheads, equal to that generally involved in sales of goods of the same quality or kind as the goods to be valued, made by producers in the exporting country for export to the European Community;
- -the cost or value of:
- transport and insurance costs of imported goods to the place of introduction of the goods into the customs territory of the European Community;
- loading and handling costs connected with the transport of imported goods to the place of introduction of the goods into the customs territory of the European Community.
How to calculate VAT and customs duties due in Italy on imported goods: a practical example
Below is a quick example to recap.
We have said that, for the purposes of calculating VAT, the customs value is defined by art. 69 of Presidential Decree 633/72 and corresponds:
- the value of imported goods;
- the amount of customs duties due (with the exception of VAT itself);
- the amount of the costs of forwarding to the place of destination within the territory of the Community as shown on the customs bill
Let’s take the case of an Italian operator who purchases goods from a Chinese supplier, at a price of € 10,000.00 with Ex Works return.
By way of example, let’s assume that:
- the goods are subject to a duty of 10%
- the costs of transport, insurance, etc., from China to the Italian border amount to € 800.00
- the transport costs from the Italian border to Rome (assuming that in our case Rome is the place of final destination of the purchased goods) amount to an additional € 400.00
The settlement of duties in the import customs bill is carried out as follows:
Duty
– Ex Works goods invoice: € 10,000.00.
– Transport costs, insurance. out-of-EU route: € 800.00.
– Taxable amount: € 10,800.00.
– 10% duty: € 1,080.00.
VAT
– Ex Works goods invoice: € 10,000.00.
– Transport costs: € 1,200.00 (note that to calculate the value of VAT it is also necessary to take into account the cost of transport to the place of final destination of the goods).
– Duty: € 1,080.00.
– Taxable VAT: € 12,280.00.
– VAT 22%: € 2,701.60.
The domestic buyer receives the customs bill with the payment of duties from customs in the manner described above and registers it in accordance with the law.
How to sell products purchased from China online
If you are planning to buy from China, you will certainly want to resell the products to third parties. Do you want to know what are the bureaucratic requirements and tax implications for you to sell goods online and when it is necessary to open a VAT number to sell online?
Need help determining which regulations are required for your product to comply with European regulations?
Our agency specializes in supporting clients in all phases of projects, including the control of CE compliance documentation and tax documentation to be presented to customs.
Rely on ImportazioneFacile.it’s experts who will take care of checking all the documents and verifying that the products you want to import comply with CE certifications.
Send us a free consultation request, where you can explain your project and we can evaluate together the best way to make it happen!
