Since ancient times, territories have always taxed goods that cross their borders. It was once an important source of revenue for local landlords, and in many cases both imports and exports were subject to taxation. Customs is the entity that controls the flow of goods and collects taxes, and is one of the oldest public entities in the world dating as far back as the Assyrian states in 2600 BC. So, if you’re selling online and discover that there are a few additional difficulties getting your products across borders, don’t panic, it’s nothing new. There has always been customs control.
Today, taxes on imports and exports play a role beyond the simple collection of additional revenue. The level of duties and taxes are levers that stabilize the local labour market, help to promote certain industries or decrease prices levels inside a country. Customs monitors the quality of imported goods and ensures that illegal products (such as weapons or radioactive materials) do not enter the country.
But as a company that sells online, what should you know about customs? The first thing to be aware of is, if you sell something abroad your goods may be subject to taxes and duties when they arrive at their destination. Many countries don’t tax goods with lower value, but this is not a general rule. Many countries also make exceptions for certain types of merchandise or personal items. The general rule to be aware of, however, is that imported goods are usually subject to taxation.
Established practice dictates that the buyer is responsible for paying all charges related to import customs. But this is not a rule and may be something that is negotiated between the the buyer and seller. The buyer will generally face the following charges:
Customs Clearance Charge
This is the cost of managing the import declaration with the authorities. It is paid to the broker, usually provided by a courier. In some countries it may be avoided if the buyer manages the declaration of imported goods directly with the authorities.
Generally VAT, however other local taxes may be included such as IGIC in the Canary Islands.
Duty charges are variable tariffs that depend on the nature of the goods being imported.
On the other hand, the seller is always liable for presenting an Exports Declaration, while not responsible for paying VAT locally. This is why all invoices issued for exports outside of the European Union don’t include VAT.
Customs regulations vary among countries. Although there are efforts to harmonize rules and tariffs across territories, there are still many differences. The growing eCommerce industry is pushing hard to get rid of customs clearance rules, for easier cross-border trade. Taking into account that processes involved in customs are based largely on bureaucracy, the growth of digital transformation may cause these obstacles to disappear in the near future, making cross-border trade easier and leaner.