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Pre-financing VAT upon import from outside of the EU?

Published on: 13 september 2022
Type of publication Insight
Related topics

We often receive questions about importing goods from countries outside of the European Union (EU). How should a business deal with the VAT which it pays to Customs? Is there a way to prevent the need for pre-financing import VAT? The answer to that last question is yes, and that is also true for businesses established outside of the Netherlands. To this end, they should appoint a VAT representative.

Upon the import of goods from a non-EU country, businesses pay the import VAT as soon as the goods are customs cleared. The Dutch VAT which has been paid can be reclaimed through the VAT return (if the applicable requirements are met). Several months may pass before you receive the reclaimed VAT.

Dutch businesses can request a so-called Article 23 license from the Dutch Tax Authorities. With this license, you do not pay the VAT to Dutch Customs. Instead, you include it in your next VAT return. In that same return, you reclaim the amount (provided you have the right to deduct input VAT).

This leads to a cashflow advantage, as there is no need to pay the import VAT first, only to reclaim it from the Dutch Tax Authorities at a much later point in time.

Not based in the Netherlands?

Businesses that are not established in the Netherlands can also make use of this attractive possibility. They can appoint a general VAT representative in order to comply with the Dutch administrative requirements for VAT purposes. This representative can request an Article 23 license on behalf of the foreign business. The general VAT representative can offer full support to foreign businesses regarding the VAT filing obligations in the Netherlands.

Cashflow advantage

This can be illustrated by the following example. On 1 January, you import goods without having an Article 23 license. The import VAT is due immediately. You submit your VAT return no later than the last working day of the (second) month following the reporting quarter. It often takes a number of weeks before the Dutch Tax Authorities pay out the reclaimed VAT, which means that you could be out of pocket for as long as five to six months.

Do you need a VAT representative?

Baker Tilly supports many businesses by acting as their general VAT representative. In addition to requesting the Article 23 license, we deal with the VAT filing obligations, and communication with the tax authorities. We can take care of all these administrative burdens for businesses. This not only provides financial benefits, but also gives you more room for your business activities. Would you like to know more about VAT representation or the Article 23 license? Please feel free to reach out to us. We would be happy to help you!

The legislation and regulations in this area may be subject to change. We recommend that you discuss the potential impact of this with your Baker Tilly consultant