VAT on imports and exports of goods outside the EU

Trade with countries outside the European Union has its own tax rules, and VAT on imports and exports of goods outside the EU brings customs and tax obligations together as one. For companies trading with third countries, it is important to know the difference between importing and exporting and the related documents that determine how the transaction is taxed. In this article we explain the principle behind both situations and what to watch out for.

Exporting goods outside the EU

The export of goods to a third country is usually exempt from tax with the right to deduct. To apply this exemption, you must prove that the goods actually left the customs territory of the EU, above all by means of customs documents confirming their exit. Without proof that the goods left, you will not be able to defend the exemption in a tax audit and you risk an additional tax assessment together with a penalty, so archive your documents carefully.

• a customs declaration confirming the exit of the goods
• transport and delivery documents
• a contract or order with the foreign customer

Importing goods from third countries

On import, the tax liability usually arises at the moment the goods are released into the relevant customs procedure. The tax base is determined from the customs value of the goods increased by customs duty and other related costs, such as transport and insurance to the point of entry into the EU. The tax is collected in connection with the customs procedure, and determining it correctly depends on accurate data in the customs declaration. Under certain conditions, import VAT can also be accounted for through what is known as self-assessment in the tax return instead of being paid during the customs procedure, which improves cash flow. However, check the specific conditions in the current version of the legislation.

Deducting import VAT

A VAT payer can deduct the tax paid on import, provided the conditions are met, if it uses the imported goods for its taxable business. It is important to have a document showing the assessment of the import VAT and to include the supply correctly in the tax return for the relevant period. The deduction thus ultimately removes the tax burden on the business, just as with domestic purchases.

Customs procedures in practice

Both imports and exports are closely linked to customs procedures, which have their own rules, deadlines and documents. In practice, many companies work with a customs broker who takes care of correct customs declarations and communication with the customs office. The accuracy of these documents is essential, because the tax assessment of the whole transaction and any right to deduct are also based on them.

What to watch out for

Most mistakes arise from incomplete customs documents, an incorrectly determined tax base on import or insufficient proof of export. Incorrect or missing documents can jeopardise both the exemption on export and the right to deduct on import, which has a direct financial impact on the company. So check your documentation on an ongoing basis and do not rely on verbal agreements alone.

A final recommendation

Since VAT on imports and exports of goods outside the EU is closely tied to customs regulations, it pays to work with a customs broker and an accountant whose work dovetails. This way you avoid delays in shipments as well as problems in a tax audit, and you can be sure you are proceeding correctly from order to posting in the books.

Related articles: Cancelling VAT registration: the procedure, Input VAT deduction: conditions and the most common mistakes, VAT rates in Slovakia and how to apply them correctly.

Frequently asked questions

Is the export of goods outside the EU exempt from tax?

Usually yes, with the right to deduct, but only if you prove that the goods actually left the customs territory of the EU. What matters most are the customs and transport documents confirming the exit of the goods, so keep them carefully.

How is the tax on imported goods determined?

The tax base on import is usually the customs value of the goods increased by customs duty and related costs. The tax is assessed in connection with the customs procedure, and a VAT payer can deduct it if the conditions are met.