Import VAT: Complete Guide to Calculation, Rates and Recovery

Introduction: import VAT, the hidden cost that weighs on your cash flow

Import VAT (or import value added tax) is often the most significant — and most poorly anticipated — cost element of an import operation. With standard rates of 20% in France, 19% in Germany or 22% in Italy, VAT can represent an amount greater than customs duties themselves. On an import worth EUR 100,000 subject to 5% duties and 20% VAT, duties amount to EUR 5,000 while VAT reaches EUR 21,000.

Understanding how this tax is calculated, when it is due, how to recover it and which special regimes allow optimization is essential for every importer. This guide covers the entire subject, from the calculation formula to reverse charge mechanisms, through applicable rates in major markets and available exemption regimes.

How import VAT is calculated

Unlike domestic VAT (applied to the selling price of a good or service), import VAT is calculated on a specific base that integrates several components beyond the simple purchase price of the goods.

The calculation base: customs value + duties + charges

The VAT assessment base comprises three elements:

• The customs value: generally the CIF value (Cost, Insurance, Freight), i.e., the price of the goods including the cost of transport and insurance to the point of entry into the customs territory.
• Customs duties: the amount of customs duties actually owed on the goods, determined by the HS code and origin.
• Ancillary charges: handling fees, inland transport to the first place of destination in the EU, and possibly anti-dumping duties, excise duties or para-fiscal taxes.

Detailed calculation example

Let us take the example of importing wooden furniture from China to France:

In this example, even with 0% customs duties, VAT amounts to EUR 5,670 of cash to mobilize — unless the reverse charge applies (see below).

Import VAT rates by country

VAT rates vary considerably across countries. Here is a comparison of standard and reduced rates in major markets:

European Union

Outside the European Union

Key point: the United States applies no import VAT. Sales Tax is a retail-level tax collected by individual states, not an import tax. This fundamental difference makes US imports less costly in cash flow terms compared to European imports.

Reverse charge of import VAT in France: the major change of 2022

Since January 1, 2022, France has generalized the import VAT reverse charge to all VAT-registered businesses. This mechanism, previously reserved for holders of a special authorization (PDU), is now automatic.

The old system (before 2022)

Before 2022, the importer had to pay VAT to customs at the time of clearance. The VAT was then recovered via the CA3 return, with a gap of 1 to 3 months. For a company importing EUR 500,000 of goods per month with 20% VAT, this represented a permanent cash requirement of EUR 100,000 to 300,000 solely for VAT pre-financing.

The new system (since 2022)

With the reverse charge, the importer:

• Does not pay VAT to customs at clearance.
• Declares import VAT on the CA3 return (line A4: imports entitling deduction).
• Deducts the VAT simultaneously on the same return (line 20: deduction of VAT related to imports).

The result is a cash-neutral operation: declared VAT and deducted VAT cancel each other out. The cash flow impact is zero, versus potentially tens or hundreds of thousands of euros under the old system.

Conditions and formalities

The reverse charge is automatic for any business with a valid intra-community VAT number filing CA3 returns. No authorization application is required. However, tax authorities conduct ex-post audits: it is imperative to reconcile amounts declared on the CA3 with customs data (ATVAI: import VAT assessment notice) transmitted by DGDDI.

Recovering import VAT for businesses

Any VAT-registered business can deduct VAT paid (or reverse-charged) on imports, subject to certain conditions:

Conditions for deduction

• The business must be VAT-registered and carry out an activity entitling it to deduction.
• Imported goods must be used for taxable operations (VAT-liable sales).
• The VAT must be supported by a customs document (ATVAI for reverse charge, or customs receipt for the old system).
• The right to deduction arises when the VAT becomes chargeable, i.e., on the date the goods are released for free circulation.

Cases where import VAT is not deductible

Import VAT constitutes a definitive cost (non-recoverable) in the following cases:

• Imports by individuals: end consumers bear VAT without any possibility of deduction.
• Non-registered entities: associations, public bodies for their non-economic activities.
• Businesses under the basic exemption: micro-enterprises below the VAT threshold.
• Goods assigned to exempt operations without deduction rights: certain medical services, education, banking operations.

Partial deduction ratio

If a business carries out both operations entitling it to deduction and operations not entitling it (partial exemption), import VAT is deductible only in proportion to the deduction coefficient. For example, a business with a coefficient of 80% can only deduct 80% of import VAT.

Special regimes: VAT exemption and suspension

Several customs regimes allow avoiding or suspending import VAT payment. Knowing them well can generate significant cash flow savings.

Procedure 42: import + intra-community supply

Procedure 42 (customs procedure code 42 00) allows importing goods into an EU Member State VAT-free, provided the goods are immediately delivered to another Member State. VAT is then due in the destination country, not the import country.

Example: a French importer clears goods in Rotterdam (Netherlands) under Procedure 42, then ships them directly to its warehouse in France. Dutch VAT is not due. French VAT is reverse-charged on the importer's CA3 return.

This regime is widely used for imports transiting through ports like Rotterdam, Antwerp or Hamburg destined for another Member State.

Temporary admission

The temporary admission regime allows importing goods with total or partial suspension of customs duties and VAT, provided they are re-exported within a given period (usually 24 months). Common applications:

• Professional equipment for fairs, exhibitions and trade shows
• Commercial samples
• Film production equipment
• Containers and pallets in international rotation

Inward processing

Inward processing allows importing raw materials or components with suspension of duties and VAT for processing, then re-exporting the finished products. It is a key regime for processing companies that use imported inputs to manufacture products destined for export.

The advantage is twofold: no customs duties and no VAT are due on imported inputs, provided the finished products are effectively re-exported within the authorized period.

Customs warehousing

Goods placed under customs warehousing are in suspension of duties and VAT as long as they remain in the warehouse. Duties and VAT only become due upon release for free circulation (exit from the warehouse for placing on the market). This allows storing goods without tying up cash for taxes.

VAT and free zones

Free zones offer a specific framework for VAT:

• Goods entering a free zone are not subject to import VAT as long as they remain in the zone or are re-exported.
• VAT is only due if the goods leave the free zone to be released for free circulation on the customs territory.
• Operations between companies within the free zone (processing, storage, packaging) generally do not trigger VAT.

This mechanism allows deferring VAT payment by several weeks or months, or even avoiding it entirely if goods are re-exported from the free zone.

Full calculation example: importing textiles from Turkey

Here is a detailed import VAT calculation for an import of cotton garments (HS code 6109.10) from Turkey to France:

Note: if Turkey benefits from a preferential agreement with the EU for this product (customs union), duties could be reduced to 0%, but VAT is always due. Free trade agreements never exempt from VAT.

Pitfalls to avoid with import VAT

Pitfall 1: Confusing duty exemption with VAT exemption

A free trade agreement can bring customs duties down to 0%, but VAT is always due. Only specific customs regimes (Procedure 42, temporary admission, inward processing) allow exempting or suspending VAT.

Pitfall 2: Forgetting ancillary charges in the VAT base

The import VAT calculation base includes transport, handling and insurance costs to the first place of destination in the EU. Omitting these charges amounts to under-declaring VAT, which can trigger a reassessment during an audit.

Pitfall 3: Not reconciling ATVAI and CA3

With the reverse charge, it is essential to verify that VAT amounts on ATVAI notices (transmitted by customs) match the amounts declared on the CA3. Any discrepancy can trigger a tax audit.

Conclusion: mastering import VAT to protect your margins

Import VAT represents a major challenge for every importer, both in terms of cost and cash flow. The generalized reverse charge in France since 2022 has considerably improved the situation for businesses, but it remains essential to fully understand the calculation mechanisms, know the available special regimes, and ensure compliance of declarations.

To simulate VAT and all costs for your next import, use our landed cost calculator which integrates updated VAT rates for over 50 countries.