Imported goods released into free circulation in a member state incur a VAT tax of that member state. If, upon import, it is known that the imported goods were meant to be shipped to another member state, the VAT is paid/charged in the destination member state. The VAT exemption on import is based on the fact that the import is followed by a tax-free delivery within the European community or the transfer of goods to another member state.
Such a procedure is known as “Customs Procedure 42”. The importer needs to enter a code in field 37 that begins with the number 42. This means that the import represents a “simultaneous entry for domestic usage and release into free traffic for goods exempt from VAT in the framework of delivery to another member state”.
Procedure 42 is allowed if the declaration contains:
- the Slovenian VAT ID of the receiver from field 8 EUL (under the code FR1) or their tax representative (under the code FR3);
- the VAT ID of the receiver of goods from another member state (under the code FR2);
- evidence that the goods have left the territory of the Republic of Slovenia and will be heading to another member state (a transport document or statement on the shipment of goods into another member state).
On import, it should be clear that the goods are headed from one member state to another. This needs to be indicated on the documents accompanying the shipment (import invoices and transport documents).
The Advantages of Customs Procedure 42
- exemption from VAT payment; when entering the EU, only customs duties are payable.
- impact on the monetary flow of the importer: the importer needs liquid assets to cover any customs duties, but not to cover VAT.
- can carry out a customs procedure on the basis of simplifications (HU).
Responsibilities of the parties involved:
Importer
- valid EORI number and VAT ID;
- authorisation for customs and tax representation to the freight forwarder;
- the submission of additional documentation on the freight forwarder’s request;
- must demand customs clearance under procedure 42 upon import;
- the import invoice needs to make it clear where the package is heading and the final recipient;
- the CMR document needs to make it clear where the package is heading and the final recipient – completed boxes 2 and 3;
- self-taxation in own country.
Carrier
- correctly completed CMR showing where the package is heading and the final beneficiary.
- the package must not be shipped or unloaded during the transit phase, but must be delivered to another member state;
- must return the CMR to the freight forwarder with the confirmation of receipt of the final beneficiary.
Freight forwarder
- checks whether the accompanying documents include information that the package is heading to another member state - document control;
- checks the validity of the tax and EORI numbers;
- prepares the import documentation, demands procedure 42 and the exemption of VAT payment;
- once a month submits the recapitulative statement to tax authorities.
Checking the validity of the EORI number
VIES VAT number validation