Import Tax — VAT, GST & Sales Tax on Imports

Key distinction: Import duty and import tax are separate charges. You pay duty based on the HS code classification, then VAT/GST is calculated on the duty-inclusive value (CIF + duty + any additional charges). This means duty increases your tax base, making accurate classification doubly important.

Import VAT follows a cascading formula — tax is applied on top of duty, not beside it:

Important: In most countries, import VAT is recoverable by VAT-registered businesses through their regular VAT return. This means the real cost falls on the end consumer, not the importer — but you still need cash flow to pay it at the border.

Note: The US does not charge VAT/GST at the border. Instead, state and local sales taxes apply at the point of sale. This makes the US unique among major economies.

Since July 2021, the EU abolished the €22 VAT exemption on low-value imports. All goods entering the EU are now subject to VAT from the first euro. To simplify compliance for e-commerce sellers, the EU introduced the Import One-Stop Shop (IOSS):

• How it works: Sellers register for IOSS and collect VAT at the point of sale. The buyer pays the VAT-inclusive price, and the seller remits VAT to the EU through a single monthly return.
• Benefit: Goods shipped via IOSS clear customs without the buyer paying additional VAT at delivery — faster clearance and better customer experience.
• Limitation: IOSS only covers goods valued up to €150. Higher-value shipments still pay import VAT at the border through normal customs procedures.
• Non-EU sellers: Must appoint an EU-based intermediary to register for IOSS unless their country has a mutual assistance agreement with the EU.

• VAT Registration: If you're importing for business purposes, ensure you're VAT/GST registered in the destination country. This allows you to reclaim import VAT through your regular tax return, making it a cash flow issue rather than a cost.
• Postponed VAT Accounting (PVA): The UK and some EU countries allow importers to account for import VAT on their VAT return rather than paying it at the border. This eliminates the cash flow impact entirely.
• Correct Valuation: Ensure your customs value doesn't include charges that shouldn't be dutiable (e.g., post-importation costs, certain royalties). Over-declaring value inflates both duty and the VAT calculated on top.
• Reduced Rate Classification: Many countries apply reduced VAT rates to essential goods (food, children's clothing, medical devices). Ensure your goods are classified in the correct VAT category.
• Bonded Warehousing: Goods stored in bonded warehouses defer both duty and VAT until they're released into domestic commerce — useful for seasonal or just-in-time inventory strategies.