Duties & taxes - who pays, supplier or customer?

[superpav]

What is general practice for paying duties & taxes for shipments outside the UK? Should the supplier cover these charges or do you pass them on to the customer?
I have been passing them on to the customer but I worry this will put them off ordering again in future.

Thanks in advance for any advice!

 

[GraemeL]

There is no answer to this. You decide. Either you include theses costs in your pricing or you dont and you tell customer in advance they will have to pay.

 

[japancool]

As GraemeL says, there's no general practise. It's up to each retailer to decide for themselves.

 

[superpav]

Thank you for your responses.

Am I right in thinking you can reclaim the VAT (but not duty) on international shipments?

 

[Duke Fame]

Thank you for your responses.

Am I right in thinking you can reclaim the VAT (but not duty) on international shipments?

A vat registered importer can reclaim the VAT or postpone it via a deferment, not pay any VAT but simply report it on the vat return.

The duty is simply an additional cost and you are right, can't be reclaimed

 

[Customs Geek]

Thank you for your responses.

Am I right in thinking you can reclaim the VAT (but not duty) on international shipments?

To clarify you can reclaim the UK import VAT or account for it using postponed vat accounting. You must also own the goods or have purchased them but not yet taken legal title to be able to claim.

In your OP you mentioned picking up costs for your customers outside the UK . If that is the case then you cannot claim back VAT incurred in other countries on your UK VAT return.

 

[superpav]

Thank you all for your responses.

I guess I will continue to pass the charges on to the customer for now, rather than increase prices.

 

[japancool]

Thank you all for your responses.

I guess I will continue to pass the charges on to the customer for now, rather than increase prices.

I assume that means you're not VAT registered?

 

[superpav]

I assume that means you're not VAT registered?

Yes, we are VAT registered.

 

[japancool]

Yes, we are VAT registered.

Then I'm a little confused by your comment about raising prices. Your prices wouldn't change (compared to your UK prices).

It works in the same way. You reclaim VAT on your purchases, and any VAT you collect on EU sales is paid to the local VAT authority instead of the UK VAT authorities, and don't form part of your VATable turnover for UK purposes.

 

[superpav]

Then I'm a little confused by your comment about raising prices. Your prices wouldn't change (compared to your UK prices).

It works in the same way. You reclaim VAT on your purchases, and any VAT you collect on EU sales is paid to the local VAT authority instead of the UK VAT authorities, and don't form part of your VATable turnover for UK purposes.

If I were to pay the taxes and duties for shipments outside the UK, I would need to raise my prices to cover these costs.

 

[japancool]

If I were to pay the taxes and duties for shipments outside the UK, I would need to raise my prices to cover these costs.

Yes - but it works out cheaper for your customers overall, since they wouldn't have to pay the local delivery company's processing charges. But yes, your list price woud go up for non-UK customers.

 

[superpav]

What incoterms do people generally use for international shipments? As I am paying the taxes and duty I use DAP. Is that the most common?

 

[Customs Geek]

You can’t generalise with Incoterms, what suits one transaction or business may not suit another. it also depends significantly on the volume of trade , whether it sea freight ,airfreight by courier etc and the experience of the buyer and seller.

Most buyers and sellers don’t understand what they really mean in any case as they rely on often outdated and incorrect or incomplete charts.

According to the ICC who publish the Incoterms, it is the buyer who “must carry out and pay for all formalities required by the country of import” and the buyer “ must pay applicable duties and taxes and any other costs related to import clearance”

As is common, particularly with e commerce, it sounds as if you are adapting the DAP rules to pick up the duty and tax costs for your customer. I assume therefore your customer rather than you are being put as the importer of record.

Again it’s up to you to decide whats best for your business an make it clear to your customers.

 

[Newchodge]

If I were to pay the taxes and duties for shipments outside the UK, I would need to raise my prices to cover these costs.

Of course, ultimately the customer pays. The question is whether they pay directly or indirectly.

 

[superpav]

Thanks so much everyone.