VAT is a post-sales VAT commonly used in EU countries, and also refers to the profit tax on the sales price of goods. According to EU law, when goods enter the EU, they need to pay import tax; when the goods are sold, the merchant can return the import VAT (import VAT), and then pay the corresponding sales tax (salesVAT) calculated based on the sales amount and other deductions. Therefore, import tax consists of two parts: import tariff and import VAT. Import VAT can be deducted, but import tariff is not deductible. Sales tax is output VAT, and the time for VAT declaration varies from country to country in Europe. The calculation formulas for import tariffs, import VAT, and sales VAT are:
Import tariff = declared value of goods x tariff rate
Import VAT = (value of goods + first-leg freight minus import tariff) x VAT rateSales VAT = market sales price/6
When sales VAT > import VAT, the seller needs to pay the sales tax that cannot be deducted; when sales VAT < import VAT, the seller will receive a tax refund. That is: tax refund amount = import VAT minus sales VAT
[Example] A pair of shoes is sent to France, the quantity is 200 pairs, the declared value is 20 euros/pair, the sales price is 100 euros/pair, it is known that the VAT rate in France is 20%, assuming the tariff rate is 10%, and the first-leg freight is 250 euros. Then the import tariff = 20x200x10% = 400 (Euro)
Import VAT = (20×200+250+400)x20% = 930 (Euro)
When declaring VAT, the 400 Euro tariff paid cannot be refunded or deducted; the 930 Euro import VAT will be refunded during the quarterly declaration or used to deduct the sales VAT.
When the number of shoes sold is 0, that is, the sales amount is 0, and the sales VAT is 0, the seller can get a tax refund (import VAT) of 930 Euro in the current period.
When all 200 pairs of shoes are sold. That is, the sales amount is 20,000 Euro, the sales VAT is 20,000/6≈3333.3 (Euro), and the VAT payable in the current period is 3333.3-930=2403.3 (Euro).
When only a part of the shoes are sold, for example, 100 pairs, the sales amount is 10,000 euros, the sales VAT is 10,000/6≈1666.7 (euro), and the VAT payable is 1666.7-930=736.7 (euro).
When 50 pairs of shoes are sold, the sales VAT is 50X100/6=833.3 (euro). At this time, the sales VAT is lower than the import VAT of 930 euros, and the VAT payable for the current period is 833.3-930=-96.7 (euro). At this time, after deducting the VAT, the seller’s VAT account will have a balance of 96.7 euros.
VAT payment:
Usually, in addition to VAT application, sellers also need to pay VAT taxes and fees on the official website of the tax authorities of the relevant countries, which is very inconvenient. Most sellers who lack professional VAT guidance often spend time and effort in the declaration and payment process. Not only do they have to pay high wire transfer fees, but failure to pay in time will also bring about consequences.
There are two ways to pay VAT: one is to find a designated formal accountant or agency to pay on your behalf; the other is to use the tax department’s official online operating system to declare on your own. The agency service fee is high, and sellers are usually unwilling to disclose complete account information to the agency for tax declaration. Therefore, many sellers choose to pay taxes on their own.