.png)
Customs Talks: Importing goods into the European Union involves administrative obligations. An important step is dealing with customs and VAT, and ensuring the paperwork and declarations are in order. It may be beneficial, and sometimes even obligatory, to seek the assistance of a (direct or indirect) customs representative.
A German Fiscal Court recently sharpened the requirements for indirect customs representatives regarding the provision of evidence for the customs clearance process.
In this article, we describe how this court case influences the business of fulfilment service providers as well as their indirect customs representatives. These insights may affect the documents they need to have in their administrative records.
Is a customs representative mandatory?
Based on EU customs legislation, any person can seek representation by a customs representative, either directly or indirectly. In the case of indirect customs representation, the declaration is made on behalf of the represented party, but in the representative's own name. The representative and the represented party are jointly and severally liable for the import duties and import VAT.
Importers that are not established in the customs territory of the Union are in fact obligated to appoint an indirect customs representative, as the declarant needs to be established in the customs territory of the Union.
Valuation of transactions
A German tax court recently dealt with a case in which the fulfilment service provider also offered customs services for its non-EU clients. These non-EU clients sold imported goods via marketplaces in the EU. The fulfilment service provider acted as indirect customs representative, releasing the goods for free circulation within the Union. The purchase transactions between the non-EU clients and their non-EU suppliers were used as the basis for determining the customs duties and import VAT. The only evidence the fulfilment service provider had of this calculation was a copy of the respective invoices received by its non-EU clients.
The Court determined that the transaction value could not be applied based solely on the transaction between the non-EU supplier and the non-EU client. The transaction value can only be used in cases where the declarant is in possession of documents necessary to enable Customs authorities to verify the entire process in terms of customs valuation. This includes accounting records of the third-country buyer (i.e. the non-EU client).
What documentation is required upon import?
Following the above, the declarant needs to be in the possession of sufficient documents to substantiate the data reported in the declaration. The Customs authorities must be able to verify this information in the accounting records, which is not possible based only on the invoice. If the indirect representative does not allow the Customs authorities to access the buyer's accounts, the audit cannot be completed. Consequently, the purchase price as noted only on an invoice between non-EU parties cannot be used and the customs value must be determined using other methods.
Shortly put, this means that both the importer and their representative may be held accountable for a possible underpayment of VAT and duties, as well as penalties for non-compliance.
Make sure your paperwork is in order!
As this court case highlights, the German Fiscal Court states this as a requirement not just for the non-EU client but also for the indirect customs representatives. Ensuring access to the proper documentation to determine the customs value is key.
If you would like to know more about the possible impact on your business or details about the German case, please read this article by our Baker Tilly International network partners in Germany (Baker Tilly Holding GmbH Wirtschaftsprüfungsgesellschaft Steuerberatungsgesellschaft). We note that this German ruling will also have ramifications in other Union states, including the Netherlands.
Would you like to know more about the customs and VAT obligations relating to the flow of goods in which your company is involved? Our advisors would be happy to assist you. Please feel free to contact our VAT & Customs Advisory experts Stevie Mols or Marisa Hut.
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 advisor.
