How is VAT to be applied when importing goods from third countries via an EU Member State other than the place of actual consumption, and what obligations do the importer and the final customer have? It is not the point of entry to the EU, but the place of actual consumption, which is decisive for VAT purposes.
Where does the tax liability arise
Within the European Union, a situation may arise in which goods are being imported from a third country into the territory of one Member State but their final destination and consumption lie in another Member State.
From a VAT perspective, the crucial aspect is:
- the place of actual use (consumption)
- as opposed to the physical point of entry into the EU.
How does the import exemption work
If, following importation, goods are transported to another Member State and the purchaser is registered as a VAT payer there, the importation may be exempt from VAT in the country of entry.
In practice, this means, for instance:
- goods are imported to Germany,
- but are intended for consumption in the Czech Republic
- → no German VAT is paid.
This exemption from VAT in Germany is conditional upon proof that the goods were actually transported to another Member State.
How to apply VAT in the country of destination
In the target state:
- the purchaser declares the acquisition of goods from another Member State
- the purchaser pays VAT in the Czech Republic under the reverse charge mechanism.
The same principle applies to any combination of Member States – the tax liability always arises in the country to which the goods are actually transported and in which they are used. The importer or final customer in the country of destination is obliged to declare the acquisition of goods from another Member State and to account for VAT in the relevant return.
The role of the fiscal representative
If the importer is not registered as a VAT payer in the country of entry into the EU, they may use the services of a fiscal representative.
The fiscal representative:
- acts on behalf of the importer
- ensures compliance with tax obligations in the country of importation
- facilitates the transfer of tax liability to the country of destination
For the final customer, this means that they do not report the import, but only the acquisition of goods from another Member State.
| What to watch out for To correctly apply the exemption, all formal conditions must be met, i.e., in particular: → providing proof of cross-state transport (CMR, confirmation of receipt, transport contracts) → ensuring consistency between invoicing, VAT records and VIES reports. |
Failure to meet these requirements may result in additional VAT being assessed in the country of import.
Conclusion for practical purposes
Cross-border imports of goods require careful coordination between:
- accounting
- logistics
- tax records
The aim is to ensure that VAT is correctly declared in the country where actual consumption takes place, and to prevent double taxation or the loss of the right to exemption.
Author: Roman Palmin, Senior Tax Consultant LYNX (Czech Republic)
Source: Council Directive 2006/112/EC
VAT Act No. 235/2004 Coll.
Press release by the Financial Administration
https://financnisprava.gov.cz/cs/financni-sprava/media-a-verejnost/tiskove-zpravy-gfr/tiskove-zpravy-2022/fs-posilila-nastroje-pro-odhalovani-kraceni-dani
