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Impact on taxes & duties

with Incoterms

The choice of an Incoterm has an impact on the amount of import duties and taxes.

In fact, the Customs value, which serves as the basis of computation of customs duties, anti-dumping duties, anti-subsidies duties even retaliatory duties, includes the cost of transport and insurance of the goods up to the point of entry in the customs territory of the European Union (EU).

Moreover, the tax basis of the import VAT is itself calculated on the customs value to which the following elements are added:

customs duties, anti-dumping duties, anti-subsidy duties even retaliatory duties
fees after the introduction of the goods, until their first destination in the territory of the EU.

Depending on the Incoterm chosen, the value of transport, transport-related services and insurance must be added or deducted from the invoice amount to obtain the customs value and the base for calculating the import VAT.

It is important to verify the place of delivery that is specified for the Incoterm, and whether the contract between the purchaser and the seller specifies any adaptation of the Incoterm.

The following table summarizes, according to the Incoterm chosen, the fees to add or exclude from the value of the importer's purchase invoice, to determine the import customs value in the EU and the base for calculating the import VAT due:

Summary of fees to include by Incoterms
		EXW	FCA	FAS	FOB	CPT	CFR	CIP	CIF	DAT	DAP	DDP
		Seller's premises		Agreed port of embarkation		Agreed destination port					Purchaser's premises
To include in the customs value	Loading, pre-carriage	+	Included	Included	Included	Included	Included	Included	Included	Included	Included	Included
	Customs export procedures	+	Included	Included	Included	Included	Included	Included	Included	Included	Included	Included
	Transport, pre-carriage	+	+	Included	Included	Included	Included	Included	Included	Included	Included	Included
	Unloading, pre-carriage	+	+	Included	Included	Included	Included	Included	Included	Included	Included	Included
	Loading, main transport	+	+	+	Included	Included	Included	Included	Included	Included	Included	Included
	Main transport	+	+	+	+	Included	Included	Included	Included	Included	Included	Included
	Transport insurance	+	+	+	+	+	+	Included	Included	Included	Included	Included
To exclude from the customs value	Unloading, at the point of arrival	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	– VAT	– VAT	– VAT
	Customs import procedures	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	– VAT
	Loading, post-carriage	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	– VAT	– VAT
	Unloading, at destination	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	VAT	– VAT	– VAT

Legend
Included	Fees included in the importer's purchase invoice
+	Fees to add to the importer's purchase invoice to obtain the customs value
–	Fees to deduct from the importer's purchase invoice to obtain the customs value
VAT	Fees to include in the calculation base of the import VAT

The Incoterm® DDP VAT excluded: not a good idea

By using the DDP Incoterm®, the parties agree that the seller will pay all fees and taxes due on import, and will bear the associated risks.

The Incoterm® "DDP VAT excluded" excludes the VAT from the taxes that must be paid by the seller, so that the seller does not bear any additional obligations for VAT declaration . The purchaser is then the importer of the goods and must pay the VAT, whereas the customs duties and the cost of customs procedures must be paid by the seller. It is important to emphasize that in this context, the purchaser bears full responsibility for the items declared with customs and bears the customs risk, contrary to the objective initially sought by the parties.