For many companies, finding ways to increase import VAT savings can feel overwhelming and difficult to implement. You wouldn’t be incorrect in thinking. It is complex to unlock Import VAT savings while ensuring 100% VAT compliance.
In short, optimising operations is about more than meeting minimal VAT compliance obligations. Ultimately, it’s about leveraging VAT regulations to maximise operational efficiency.
This article sets out to demystify the murky waters of international VAT compliance for importers and exporters. Ultimately, giving your business a handbook on how to stay compliant and optimise VAT savings to boost cash flow.
Smart VAT Management for Importers and Exporters
In management terms, mastering the VAT regulations that apply to imports and exports have import cash flow consequences.
Smart VAT management helps businesses to optimise cash flow and ensure goods move swiftly through customs, without costly delays. VAT expertise thus clearly has important operational implications for importers and exporters that extend well beyond basic questions of regulatory compliance.
Savings opportunities exist in many areas around logistics and shipping. A business is able to unlock savings in areas such as:
- Importer of records;
- Freight fees;
- Import VAT reclaim;
- VAT deferment schemes.
However, it can be overwhelming to look into all these opportunities as a small business or if you have limited resources in your finance department.
An expert VAT consultant that understands a business’s operational needs is, therefore, an important business asset for any company involved in importing or exporting goods.
VAT savings opportunities for importers and exporters
To appreciate the practical consequences of smarter VAT management, let’s consider some practical examples.
VAT deferments for importers and exporters
Many countries offer VAT deferment schemes that enable importers to defer payment of import VAT, as well as other charges such as customs and excise duties.
The ability to defer payment to the next month, or later, has obvious cash flow benefits in itself.
Moreover, in some cases it may even be possible to secure a rebate on import VAT prior to the deferred date at payment is due to be made.
The regulations are constantly shifting, especially as states act to help firms address liquidity issues in a post-Covid world. To help your business prepare, it is helpful to consult with experts who can advise on measures to prepare for regulatory changes before they go into effect.
How to increase Import VAT Savings for importers and exporters
In many cases, in order to claim back import VAT, you will need to be registered for VAT in the country to which you are shipping goods.
If you are exporting goods to multiple countries, you may be required to register for VAT in each of them.
That may sound complex, but neglecting to do so not only raises the spectre of compliance issues, it may make it impossible to claim back import VAT.
A VAT consultant with global expertise can help simplify the process and ensure you meet all local compliance requirements.
Sometimes a business has no obligation to register in a foreign country yet it still ships goods to the country (usually DDP shipments). In this situation, there may be an import VAT reclaim op[opportunity. It occurs when the country offers a reclaim mechanism for non-resident businesses. Therefore, your business is able to claim back the import VAT.
Importer of Records
Without the proper compliance protocols in place, goods may be stopped either at the point of departure or at the point of entry.
That can mean costly delays, plus the potential to incur additional expenses, such as warehousing. The exporter may even be liable for penalties.
The precise obligations of any business moving goods across borders will depend on a number of elements. These include the nature and value of the goods and the status of the taxable person. For example, non-resident importers will need to appoint an Importer of Record to ensure goods do not get held at customs.
Businesses need to ensure they have a complete understanding of the regulatory and logistical requirements. Put simply, the more countries you’re shipping to, the more complicated it gets. Doing so will help to ensure smooth operation, without incurring deleterious costs and penalties.
Disclaimer: Reproduced/Adapted with permission from VATGlobal.