VAT and DDP

[The Soup Dragon]

We have a customer in Germany who is looking to have us send to him on a DDP basis so he doesn't have to mess about with customs etc and pay the VAT etc and thus get a straight swift delivery.

The usual retail price of the item is circa £100 shipping is £15 and the the DDP part costs us circa 20% plus an admin fee of £15 total invoice to the customer is therefore £150

The item costs us £10 to produce so I am thinking of selling it to him for £20 and sending DDP but charging him £80 for shipping thus final invoice would be something like £120 giving him a better deal and costing us less in DDP VAT payments.

This seems like a workaround but is it above board?

SD

 

[NickGrogan]

We have a customer in Germany who is looking to have us send to him on a DDP basis so he doesn't have to mess about with customs etc and pay the VAT etc and thus get a straight swift delivery.

The usual retail price of the item is circa £100 shipping is £15 and the the DDP part costs us circa 20% plus an admin fee of £15 total invoice to the customer is therefore £150

The item costs us £10 to produce so I am thinking of selling it to him for £20 and sending DDP but charging him £80 for shipping thus final invoice would be something like £120 giving him a better deal and costing us less in DDP VAT payments.

This seems like a workaround but is it above board?

SD

How can changing the price of a product to avoid VAT be "above board"?

If he doesn't want to mess with VAT and customs he should be prepared to pay more, so bill him for £150 as this is what it will cost you.

 

[Deleted member 351022]

We have a customer in Germany who is looking to have us send to him on a DDP basis so he doesn't have to mess about with customs etc and pay the VAT etc and thus get a straight swift delivery.

The usual retail price of the item is circa £100 shipping is £15 and the the DDP part costs us circa 20% plus an admin fee of £15 total invoice to the customer is therefore £150

The item costs us £10 to produce so I am thinking of selling it to him for £20 and sending DDP but charging him £80 for shipping thus final invoice would be something like £120 giving him a better deal and costing us less in DDP VAT payments.

This seems like a workaround but is it above board?

SD

German import VAT at 19% will be due on the goods value plus shipping so messing about with the ratio of goods cost and shipping won’t achieve any cost saving.

Goods ( excluding shipping)value below €150 are relieved of any import duty but not VAT.

German customs are pretty tough on undervalued goods so it’s not a legitimate workaround to undervalue goods to avoid tax. You stand a bigger chance of the shipment being stopped / delayed or even seized.

Assuming this is a retail sale the customer should pay the same amount of VAT whether you or they pay it. The difference is the £15 you get charged for the taxes to be billed to you.
If they want that convenience it comes at a cost.

 

[DefinitelyMaybeUK]

plus an admin fee of £15

How are you looking to ship? It's worth double checking the fees - We've found that the DDP fee quoted by say UPS may be ~£7.50, but in addition you'll be billed the usual in country handling disbursement that the customer would normally pay too, typically €15-18. Same goes with DHL. However, if you are able to process as IOSS (and you're below the €150 goods limit in this case) then you can just supply your IOSS number to the carrier and not incur any extra "DDP" fees. If though your order is small/light enough and you have a Royal Mail business account, then their (P)DDP service to Germany works very well with a fee of 50p.

 

[The Soup Dragon]

How are you looking to ship? It's worth double checking the fees - We've found that the DDP fee quoted by say UPS may be ~£7.50, but in addition you'll be billed the usual in country handling disbursement that the customer would normally pay too, typically €15-18. Same goes with DHL. However, if you are able to process as IOSS (and you're below the €150 goods limit in this case) then you can just supply your IOSS number to the carrier and not incur any extra "DDP" fees. If though your order is small/light enough and you have a Royal Mail business account, then their (P)DDP service to Germany works very well with a fee of 50p.

Thanks order is about £3k total

 

[DontAsk]

Thanks order is about £3k total

So where on earth did the £20 plus £80 shipping come from?

What's the admin fee for a £3K order?

 

[The Soup Dragon]

Dunno, looking for best way to slice it and dice it