Customs and VAT optimization

When investigating possible locations from where to organize their distribution for the European market, companies often tend to forget to take into account the implication of indirect taxes (such as customs duties and VAT) within their supply chain. Neglecting such taxes might seriously impact companies' cash flow/treasury.

To avoid this drawback, Luxembourg offers efficient supply chain optimization solutions either:

• by giving the possibility to store the goods in a customs warehouse until a selling order
• by avoiding VAT pre-financing when importing goods through Luxembourg.

No VAT pre-financing in Luxembourg

Beside custom duties, importing goods into the European Union (EU) triggers a VAT liability in the country of importation, unless the goods are placed in a bonded warehouse. Most EU countries require immediate payment of VAT. Luxembourg’s advanced VAT regulations have completely eliminated this process. Therefore no cost is linked to the pre-financing of import VAT in Luxembourg. While several other EU countries allow similar processes upon request and under certain conditions, the key differentiation factor of Luxembourg compared to those countries is the easiness of the process: automatic and unconditioned.

 

When considering the location of setting up a European distribution centre, it is important to take into account:

• incoterms® agreed between parties
• location of main suppliers and clients
• specific VAT regulations.

These factors can have a negative impact on your cash flow/treasury.