Tariffs refer to a tax that the customs of a country has the right to levy on goods passing through the customs territory according to the laws of a country.
Tariffs are levied based on the dutiable price. For exported goods, the dutiable price is the price confirmed by the customs after deducting the export tax from the FOB price of the goods sold abroad; and for imported goods, the dutiable price is the CIF price based on the transaction value approved by the customs.
The general way to pay tariffs is that the customs, which manages the customs clearance procedures for imported and exported goods, integrates and calculates the tariffs payable, and issues tariff payment slips to e-commerce sellers. E-commerce sellers take the payment slips to the customs or go to the designated bank to pay taxes or handle the transfer and warehousing procedures. The customs party will handle the customs clearance and release procedures for the goods of the e-commerce sellers based on the bank receipt. Simply put, the tax collection procedures are first, and then the customs clearance and release procedures. This is the tax payment method of customs in most countries. Customs in various countries use this method as the basic tax payment method.
The calculation formula of the taxable amount of tariff: taxable amount = duty-paid price x applicable tax rate.
During the export process, China Customs will also impose tariffs on exported goods. Domestic customs have clearly stipulated the provisions for imposing tariffs on products involving about 47 tax numbers in the import and export tariff. At present, a single tax system is implemented for domestic export goods, using only one tax rate.
The offshore price sold abroad based on the transaction price approved by the customs, after deducting the export tariff, is the duty-paid price of the exported goods.
The calculation formula of the tariff for exported goods: export tariff = duty-paid price x export tax rate
VAT (Valud Added Tax, VAT) refers to a turnover tax commonly used by European countries to collect the value-added of the taxpayer’s production and business activities.
Take the UK as an example. When goods enter the UK, they need to pay import taxes. Import taxes mainly refer to import value-added tax. When the goods are traded, e-commerce sellers can use the import customs value-added tax as input tax, apply for a refund from the relevant departments, and then pay the corresponding sales tax based on the sales amount of the transaction.
VAT applies to exports to the UK, including commercial transactions and corresponding service activities. It also applies to e-commerce sellers who use overseas warehouses to store goods, because the products of e-commerce sellers are shipped and the goods transactions are completed in the UK. The goods have been stored in the UK during the sales process, and VAT is not required to be paid when they are imported into the UK by UK buyers. Therefore, e-commerce sellers who use warehousing services in the UK must pay VAT in accordance with the law.
The necessity of paying VAT in European countries is as follows.
(1) If the corresponding VAT tax number of the goods is not used when the goods are exported, then there will be no import VAT refund.
(2) If the relevant department finds that VAT is borrowed from other than the goods themselves or an invalid VAT tax number is used, the relevant department has the right to detain the goods and complete customs clearance.
(3) If the e-commerce seller cannot provide a real and valid VAT invoice to the overseas transaction buyer, then the buyer can directly cancel the transaction and give the product a bad review at will. If e-commerce sellers have real and valid VAT and operate legally, they can be protected by law during the export process, ensuring normal transactions between buyers and sellers, and helping to increase buyers’ trust and transaction rates.
(4) The tax authorities in the UK and Germany are using various channels to obtain the VAT tax numbers of cross-border e-commerce sellers. Amazon, eBay and other platforms have also begun to respond to local tax laws and gradually require e-commerce sellers to submit VAT tax numbers. Therefore, e-commerce sellers with real and valid VAT tax numbers are more likely to pass the review of various e-commerce platforms and prevent being blocked by e-commerce platforms, which is conducive to the development of e-commerce sellers on e-commerce platforms.
The following is the process and declaration method for completing VAT registration in the UK.
(1) Cross-border e-commerce sellers provide complete information.
(2) After reviewing the information, submit the application to the tax authorities.
(3) Cross-border e-commerce sellers receive the VAT tax number and the notification document issued by the tax authorities (the notification document is generally delivered within 2 to 5 working days).
(4) Cross-border e-commerce sellers receive the paper version of the VAT certificate within three weeks.
(5) Cross-border e-commerce sellers bind relevant VAT accounts to understand the tax payment dates for each quarter.
(6) Cross-border e-commerce sellers prepare quarterly sales data declaration forms and submit them to HMRC.
(7) Cross-border e-commerce sellers pay quarterly taxes directly to the UK tax bureau account.
The necessary materials for VAT application include the legal representative’s passport, company business license, legal representative’s ID card (if there is no passport, a driver’s license can be used), and e-commerce platform system information. The following are auxiliary materials: (only two of them need to be provided) housing loan certificate, work-related registration documents, personal pages of the household register, rental contract, birth certificate, employer’s letter of certification and contract.