VAT is not just due on supplies of goods and services, but also on imports of goods into the EU. Normally, VAT is payable to the Customs authorities at the time of import, and the same VAT amount can be recovered as input tax on the importer’s VAT return. This can be a rather significant cash flow burden (think 20% of the gross value of the imports).
The Netherlands has been a pathfinder in streamlining this process. Many years ago they allowed domestic business to defer the liability of VAT on import to the next VAT return. As a result, and subject to obtaining a license, Dutch import VAT can reported on the VAT return instead of paid to the Customs and the same VAT can be reclaimed on the same VAT return.
Even more, the Dutch authorities allowed the same simplification to non-resident importers (for example U.S. companies doing business in the EU), on the condition that the importer would appoint a local fiscal representative.
This so-called article 23 license has been a key driver for simplifying Dutch import VAT compliance. In addition, it created significant efficiencies on the government’s side for both internal revenue allocations and tax audits.
Recently other EU countries have established similar simplifications for import VAT compliance. Most notably the UK and Belgium apply somewhat similar systems.
From January 1, 2015 Spain, France and Sweden have started to accept applications for a deferment of import VAT liability along the same lines of the Dutch model. France allows non-resident importers to appoint a local rep (exactly the same as the Dutch). Spain and Sweden have yet to issue further guidance on import VAT simplification for non-residents.
The Port of Amsterdam