Importing goods what costs are involved

When importing goods from abroad (with the aim of reselling them on Bol.com), there are many things to consider. In the previous two blogs(Importing Products and The Incoterms) you have already read what you have to consider when entering into a trade transaction with the foreign supplier. Now we have come to the follow-up; the moment the product enters the Netherlands. Here too there are a number of obligations that we would like to run through with you.

Highlights from this blog:

• The obligations/costs from the moment an imported product arrives in the Netherlands;
• How Article 23 can increase your company's liquidity

To begin with

The first thing you have to deal with the moment a product arrives in the Netherlands from a non-European country is the clearance process. Please note that the clearance process only applies to you when you import goods from a country outside the European Union.

This process involves the carrier advancing any costs of import duties, customs declaration, VAT, excise, storage costs and administrative action at customs for you so that the products can be delivered. You will have to repay this amount later. Because complying with customs formalities - in most cases - is your responsibility (who is responsible for customs formalities when can be read in the previous blog: The incoterms: what do they mean?). Advance these costs and the interaction the carrier has had with customs on your behalf. For this, the carrier charges customs clearance fees. So these charges are in addition to the amount the carrier has advanced for you. The clearance fee is fixed and independent of the value of your order.

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Overview:

• For packages with a value of up to and including €22, you pay no additional fees at customs. In addition, if you do not incur any storage or administrative costs. Then carrier will not have to advance any amount and will not charge customs clearance fees.
• For packages with a value above €22. Then you pay VAT and the cost of customs declaration of the goods. And no import duties. On top of this comes the customs clearance fee.
• For packages with a value above €150. Then you pay VAT, the cost of customs declaration of goods and import duties. On top of this there are customs clearance fees.

Now that you know there can be costs due to customs formalities. With on top of that, customs clearance fees passed on by the carrier, you must have become curious about how high these costs will be for you. The amount of import duties and VAT depend on the type of products you purchase.

Import duties

You should calculate import duties on the price of the products, shipping costs and any insurance costs. Import duties, also known as customs duties, are only payable if you are purchasing products from a country that is not a member of the European Union and the shipment has a value of at least €150, excluding transportation and insurance costs. To determine the amount of import duties, HS codes (Harmonized System-Codes) are used. The European Union uses the Taric code (or Taric) as the customs tariff; 183 countries are members of this system of product classification.

The World Customs Organization (WCO) classifies different products from different countries through this system with a 10-digit code. This 10-digit code is called the TARIC code and you need to mention it when importing the products. So the rate of import duty depends on the Taric code that belongs to your product. In the Netherlands the customs authorities use the Gebruikstarief (Usage tariff). This Gebruikstarief consists of the same code as the Taric, but may be supplemented with national codes of twice two digits. You can look up the exact Gebruikstarief of your products at the Douane Tarief Voorziening(DTV ).

The VAT

You have to calculate the cost of VAT on the price of the goods, shipping costs, any insurance costs and import duties. If you import products from a country that is a member of the European Union, you need to check whether there are any intra-Community acquisitions. The tax authorities have drawn up a tool for this. In most cases you will not have to pay VAT, but there are exceptions. If the purchase is not an intra-community acquisition taxed in the Netherlands, for example if it involves assembly or installation by the foreign supplier, you will have to pay tax. So check this carefully yourself with the tool.

As a business owner, you will certainly have to pay VAT in the Netherlands if you import products from a country that is not a member of the European Union. In general, the rate of VAT is 21% of the turnover. For some products a lower rate applies, namely 9% or 0%. You can find out for yourself which rate applies to your product. As a seller, you charge this amount in the price for which you sell the products.

A mathematical example

To see if you understood the above correctly, here is an example of how to calculate import duties and VAT on a product.

You are purchasing an electric keyboard for €176.The shipping cost of this is €23. The insurance cost is €10.

• You pay import duties over €176,- + €23,- + €10,- =€209,-. Import duties are 3% of €209,- =€6,27.
• You pay VAT on €176.00 + €23.00 + €10.00 + €6.27 = €215.27. The VAT is 21% over €215.27 = €45.21.
• You pay to customs: €6.27 + €45.21 = €51.48.

So when importing products, many costs arise that you need to take into account prior to purchasing. This is to prevent you from not being able to meet your financial obligations the moment a product enters the Netherlands. So in any case, be aware that in addition to the fixed agreements with the supplier and agreements on transport, you will also have to deal with obligations from the Dutch government. The fact that VAT has to be paid directly to customs is very disadvantageous for you as an entrepreneur, because you can only deduct these costs when filing the VAT return. This negatively affects the liquidity of your bol.com business. Fortunately, we have good news to end with if you regularly purchase goods from countries outside the European Union; there is an Article 23! 

Permit Article 23 

Our tip is as follows: If you do international business and import goods from a country that is not a member of the European Union, then it is advisable to apply for a Section 23 permit from the tax authorities. Section 23 can be created by you as an entrepreneur when you want to shift the moment of payment of VAT costs that arise when importing products. This may sound a bit complicated, but in practice it means that you will not pay the VAT at the moment products are imported (at customs). Instead, you will pay the VAT only at the time of the VAT declaration; in fact, you will then pay an amount of €0, because the VAT will be directly deducted in the declaration. This reverse charge will result in a liquidity advantage for you as an importer compared to paying the VAT directly when the product enters the Netherlands.

In addition, thanks to this license, you no longer use the advance commission on VAT to generate a healthy cash flow. As a result, you do not have to take into account the various variables that can affect VAT expenses. Besides the fact that your liquidity and finances will improve if you use the Article 23 permit, using this permit will speed up the process of importing the products. Only advantages. As far as we are concerned, applying for an article 23 license is definitely one to do today. It's completely free too.

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The roadmap

To get you started, here is a step-by-step plan for applying for a Section 23 permit, so you don't have to worry about a case of "easier said than done.

1. Check your eligibility. The Internal Revenue Service has laid out three conditions you must meet to be eligible;

• As an entrepreneur, you live in or are based in the Netherlands;
• You regularly import goods from non-EU countries;
• You keep separate records that easily show how much VAT you have to pay on imports;

It is therefore important that you have all data relating to the VAT payment ready. If you do not keep a separate administration for the VAT that you have to pay, this is definitely something to start with.

2. Gather all information and include it with the application. When you submit the application to your tax office, you need to provide the following information:

• Your VAT identification number;
• Your sales tax number;
• The company name of the company under which you import products;
• The kind of products you import;
• Product value;
• The countries outside the EU from which you import the products;
• The number of times per year you import products from non-EU countries;

3. Be patient. The decision on an application for an Article 23 permit will take up to 8 weeks, although in practice most applications are processed within 2-4 weeks. Yet, unfortunately, the wait does not end here, as the permit will not actually go into effect until all the data has gone through customs. 

Conclusion

Selling on bol.com can seem trickier than it actually is. As you have read, there are many different costs involved that affect your final profit margin. Not only is your profit margin affected by all the cost items, it is also an administrative process. Fortunately, you can exert a fair amount of influence by reading up on it, knowing how everything is structured and, for example, creating Article 23.