The European Union today has 27 members: Spain, Germany, Austria, France, Portugal, Italy, Belgium, Netherlands, Luxembourg, Ireland, Sweden, Finland, Denmark, Poland, Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Croatia, Slovenia, Estonia, Lithuania, Latvia, Malta, Cyprus and Greece. The UK requested the exit of the EU in 2016, The UK applied for the EU to leave in 2016, and the withdrawal agreement has been definitively approved on 31 January this year.
The EU is a customs union, that means that the introduction of goods into the EU is subject to common laws and regulations for the 27 countries, not only for the payment of taxes or duties, but it also considers common rules for other fields, like health, quality, phytosanitary, security… The money collected from the customs duties goes to the European Commission, that is, duties help pay for the costs of the government of the EU.
The main customs law of the EU is the Regulation 952/2013 —the so called Union Customs Code UCC—. There are another two laws that complement the UCC: the Regulation 2015/2446 and the Regulation 2015/2447. There are many other customs-related laws, we will talk about some of them later.
The Value Added Tax – VAT – is a national tax, it means that the money collected from VAT helps pay for the costs of the government of the individual countries of the EU. Despite the VAT is a national tax, VAT rules are coordinated among the 27 EU countries, so all EU countries have very similar VAT rules and the cross-border rules between EU countries is also coordinated from the point of view of VAT. In the case of Spain, the VAT Law is 37/1992.
LOW AND MIDDLE VALUE RULES IN THE EUROPEAN UNION
The EU Regulation 1186/2009 sets up the community system of reliefs from common duty. This rule talks about some exceptions where goods may pay lower or even may not pay import duties.
The article 23 of the aforementioned Regulation 1186/2009 states that those goods from third countries (e.gr, China) that goes to consignees in the EU may be imported without duties if their value is below EUR 150.
Other articles of this law and other rules state that only imports that go to individuals (no companies or entities) may earn such exemption of duties. Besides, the goods must not be subject to health, phytosanitary or quality or security inspections to earn such exemption.
In the previous chapter, we mentioned that VAT laws are coordinated inside the EU, so they are very similar. In the case of the Spanish VAT law 37/1992, in its article 34, it states that those imported goods whose value does not exceed globally EUR 22 will be exempt of VAT.
The VAT laws of most countries of the EU have similar articles that exempt the payment of VAT of goods coming from third countries whose value does not exceed EUR 22.
This way, if we sum together the article 23 of EU Regulation 1186/2009 and the article 34 of Spanish VAT law 37/1992, we may deduct that:
- Those goods under EUR 22 pay no VAT and pay no duties (we call them low values)
- Those goods between EUR 22.01 and EUR 150 pay national VAT, but they pay no duties (we call them middle values )
In the case of the goods under EUR 22, always if they follow the rules of no health inspection, and they follow the rule that the consignee must be an individual, since these goods don´t pay for any VAT or any duties, then, the national governments are not concerned about VAT, so these goods may be imported through any customs of the European Union, no matter the country of destination of such goods. That is why airports like CDG, AMS, LGG or LHR are massive import gates for low value shipments.
In the case of Spain, there is a national customs regulation that says that shipments destination other countries of the EU (non-Spain) will not earn any VAT or duty exemptions. It is only possible to earn the exemptions if the consignee lives in Spain.
CUSTOMS DECLARATION FOR LOW AND MIDDLE VALUES
Low value packets (up to EUR 22), since they have no duties or VAT, in the case of Spain, they have an electronic customs declaration, but they don´t have a formal format. It is an electronic message recorded in Cacesa´s system. It is fully trackeable if customs or the consignee needs a record of it or a proof of it.
The national customs regulation allows us not to declare the consignee´s tax ID and it allows us to declare the generic HS code 9990000100 for all the goods up to EUR 22.
There is a new European Law that establishes that low value exemption will disappear as from 2021 – that is, goods will have to pay for VAT as from the first euro of value – and it establishes new rules of VAT payment between EU countries. But the definitive law text has not been published yet.
In the case of middle values (from EUR 22.01 to EUR 150), since they are exempt of duties, but they have to pay for VAT (21% in the case of Spain), the EU laws establish that it is mandatory to issue a formal electronic customs declaration in a specific format. In the EU, this declaration format is called SAD: Single Administrative Document. Since the individuals cannot deduct the VAT, the simplified customs procedures allow not to write the tax ID of the consignee (in Spain, Cacesa writes our own tax ID ) or it allows not to write the HS code, same as with the low values, we write the generic HS code 9990000100.
Here is an example of a SAD of a middle value:
GENERAL VAT RATES IN THE EUROPEAN UNION
VAT rates may vary from country to country. In general, there may be 4 different VAT rates in every individual country:
- Zero: for education or health services.
- One super-reduced: normally for basic food, medicines or books (in Spain it is 4%).
- Reduced: for elaborated food or some services, like public transportation (bus, metro…). In Spain, it is 10%.
- General: for most goods and services. In the case of the medium value, EU laws establish that the VAT to charge for medium value imports, it must be the general VAT rate. In the case of Spain, it is 21%.
Next, you have the list of the VAT general rate of all EU countries and UK:
© Rodrigo Peñas – Commercial and Operations Director
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