Import tax is applied when imported goods first enter the country.
When your shipment of goods reaches the border, you must file entry documents at the port of entry and pay the estimated duties to customs.
Import taxes – also known as tariffs – are put in place by countries for two purposes:
- To raise income for the government
- To give a market advantage to locally grown or produced goods that are not subject to import duties
The amount of import tax paid in the UK varies depending on the goods, the country of origin and several other factors. According to Gov.UK, these include the costs of:
- Delivery to the EU border
- Most commissions (except buying commission)
- Royalties and licence fees paid by you on the imported goods as a condition of sale
- Containers and packing
- Any proceeds of resale the seller will receive
- Goods and services you provide to the seller for free or at a reduced cost – such as, components incorporated in the imported goods, or development and design work carried out outside the EU and necessary for the production of the imports
How to calculate import tax?
To calculate the import tax you need to pay, you could use an online duty calculator such as SimplyDuty. This makes duty and tax calculations simple for importers, customs brokers, retailers and logistic carriers.
International organisations and import tax
Several global organisations and treaties have a direct impact on import duties. Over several decades, a handful of countries have tried to reduce import taxes to promote free trade.
The World Trade Organization (WTO) promotes and enforces commitments that its member nations have made to reduce tariffs. As of 2018, there are 164 members and 23 observer nations.
Countries also reduce tariffs using multi-lateral or bi-lateral free trade agreements. For example, the North American Free Trade Agreement between the U.S., Mexico and Canada (now called the United States-Mexico-Canada Agreement (USMCA)).
Times when you don’t need to pay import tax
There are a number of ways you may be able to legally avoid paying import tax, including: temporary admission, ATA Carnet and inward processing.
What is a temporary admission?
If you’re importing goods that you’ll later export or re-export, you may be able to claim relief from customs charges through temporary admission (TA). While TA doesn’t remove the need to comply with any import/export prohibitions or restrictions – if your goods are temporarily imported for use – relief from import tax or VAT may be available provided the goods remain in the same condition. Goods eligible for TA may include:
- Those for a demonstration or exhibition
- Professional equipment
- Those for humanitarian purposes
What is the ATA Carnet?
One method of temporary admission is the ATA Carnet, or passport for goods. The Carnet is usually issued in the country of dispatch by local chambers of commerce and industry and is used in place of customs documents required at import and/or re-export.
ATA Carnets are only applicable in countries which are signatories to the ATA Carnet or Istanbul Conventions. While minor handling is permitted to preserve the goods, you can’t use these reliefs for goods you plan to process before re-exporting.
What is inward processing?
If you’re importing goods that you intend to process and then export, you can claim Inward Processing. There are two methods of Inward Processing duty relief: suspension and drawback.
Inward Processing suspension allows you to import and process the goods while suspending duty and VAT payments. With Inward Processing drawback, duty and VAT is paid on importation but can be reclaimed. You must be authorised to claim this kind of relief so it’s important to check your local regulations.
When importing goods from overseas, you should be aware of your country’s import regulations and taxes. It’s wise to know how much import tax you need to pay on goods, how you can calculate duty and whether there are any legal ways – such as temporary admission and inward processing – you may be able to avoid paying import tax.