Rail Freight - China to UK DDP

[NT100]

Hi

Im looking for a bit of advice here..

A supplier in China has a freight forwarder and has suggested DDP train shipping door to door and the price is good.

However when i have asked who pays and when the VAT and import duty they say its included in the cost.

I have asked that I receive the documentation of customs clearance proof of VAT and import duty paid for my records (in case of tax inspection) they say you wont receive anything apart from a receipt.

They say the goods will be delivered to your door with a receipt and thats it... and dont worry.

The price of DDP shipping is less than the VAT and import tax alone, so how can this be correct?

My company is not VAT registered yet but does have an EORI number.
The freight forwarder says they need a VAT number.

According to UK customs i dont need a VAT number, just an EORI number.

What do i actually have to supply to the freight forwarder for the goods to be shipped to the UK and customs cleared legally?

If i pay DDP shipping should i be receiving proof the VAT and import duty is paid?

I dont want to receive goods where i have no proof the tax is paid and are illegally imported.

Many Thanks

 

[Paul Kelly ICHYB]

I thought that as it means delivered DUTY paid it doesn't include VAT (but a very long time since using it). However, on checking, it should cover all costs including VAT.

If your supplier has got their calculations wrong, you may have to get involved to get hold of the goods. One option is to pay by LC and ensure DDP is indicated.

 

[Mike Foulds]

DDP is Delivery Duty Paid, and would NOT include VAT. That would need to be paid by the consignee, which is why an EORI is required.

I would definitely suggest you pay and control the clearance side of things, as otherwise you have no way of knowing if products you receive are being delcared correctly, and if incorrect, and you've sold on, customs may come back to you asking for funds.

A Freight forwarder would require Invoice, Packing List and copy Bill of Lading. Depending on the product, Ceritificates of origin, etc, may be required, but I would sugesst you get your shipper to confirm the HS Tariff codes, so you can check adn confirm that. You will also need to provide an authority to the forwarder, to enable them to complete entries on your behalf, they should have a template they can send you to complete.

Hope that helps

 

[The Byre]

My company is not VAT registered yet but does have an EORI number. The freight forwarder says they need a VAT number.

Outside of the strange and convoluted world of UK tax law, a VAT number or its local equivalent is regarded as proof of your being a registered business that is actually trading. Not having a VAT number can cause all kinds of interesting additional expenses and complications!

 

[Andy777]

This is basically a scam/tax evasion scheme that has been running for some time now and I believe - at a massive scale. They basically smuggle goods into the EU without properly declaring them.

This is NOT a legit DDP deal where all the taxes, including VAT, are paid and accounted for.

My advice - don't ever use DDP from China as taxman will have a lot of questions when they revisit your books.

You can read more about the DDP scam in my blog post here:

https://andrewminalto.com/delivered-duty-paid-ddp-scam/

 

[paulears]

It's also a great hobby checking in every day and discovering how long it takes to get across Russia! My one try sat in a station goods yard for a week, before moving west again, but the route is quite interesting - It speeded up quite a bit when it got to Hungary.

 

[jimbof]

DDP is Delivery Duty Paid, and would NOT include VAT. That would need to be paid by the consignee, which is why an EORI is required.

I would definitely suggest you pay and control the clearance side of things, as otherwise you have no way of knowing if products you receive are being delcared correctly, and if incorrect, and you've sold on, customs may come back to you asking for funds.

A Freight forwarder would require Invoice, Packing List and copy Bill of Lading. Depending on the product, Ceritificates of origin, etc, may be required, but I would sugesst you get your shipper to confirm the HS Tariff codes, so you can check adn confirm that. You will also need to provide an authority to the forwarder, to enable them to complete entries on your behalf, they should have a template they can send you to complete.

Hope that helps

I'm not an accountant, but...

My only dealings on DDP incoterms include VAT where payable. True DDP is surely delivered with VAT paid if applicable, as the seller assumes all resposibility for taxes due to get it to the location. There are two large US firms I buy from DDP regularly that operate with a subtle difference - Digikey and Mouser. Digikey have a UK registration they use for the DDP and so send invoices with VAT shown clearly which I can offset, without me having to pay the VAT with the couriers before or after receiving my goods. Mouser have a French VAT registration and so legitimately send without me without charging VAT (as I have a GB VAT number). If I didn't have a VAT number, to send DDP Mouser would have to charge the French VAT at source.

This would support this point of view:
https://www.jpaccountant.info/2020/05/07/ddp-and-ddu-what-are-the-vat-implications/

Anything going by the name of DDP that is trying to avoid VAT totally isn't DDP, it's something else (eg DDP with VAT unpaid).

It is my understanding that if the buyer has a UK VAT reg and the sending company has a VAT registration in Europe that they could send the product to you without VAT being paid at the border. You of course wouldn't be able to offset any input VAT against output VAT (there isn't any input VAT to offset) and when you come to make the sales, you'll be paying at that point (you'll charge 20% VAT on your item, without having been able to reclaim input VAT).

However, it is fair to say that you should be able to be provided with paperwork to show what is going on, including paperwork with your GB VAT number and your supplier's EU VAT number. If they can't, then it does smell like a scam. And I'm sure there are scams around this...

 

[The Byre]

This is basically a scam/tax evasion scheme that has been running for some time now and I believe - at a massive scale. They basically smuggle goods into the EU without properly declaring them.

And it's been going on for ages!

A Swiss import agency was doing this big-time from 1990 to 1999. Computer components - chips, boards, disks and anything in between from Taiwan, China, Japan. Some people I knew used them for all their parts for a German computer wholesale company. When the taxman called, they were in the hole for (in today's money) for £60m. With one visit from the investigation branch of the Finanzamt, they were finished.

The Swiss agency? Vanished! Evaporated! No such number. No such zone! Everything was fake. Fugazi!