YOU ARE NOT THE
AND IT IS NOT EXACTLY
ROCKET SCIENCE EITHER...
SETTING UP EUROPEAN LOGISTICS
Congratulations! Choosing for The Netherlands as location for your European inventory, grants you with the maximum flexiblility and professionalism. The Netherlands form a
Gateway to Europe for over decades and host a large number of worldfamous brands.
A part of those companies has chosen to set up their own legal entity with different reasons. Another part supplies EMEA (Europe Middle East and Africa) from The Netherlands
without having an entity. Without a doubt, they have chosen for fiscal representation in order to avoid to pay VAT (Value Added Tax) when importing their goods into the European Union.
This whitepaper describes all the necessary steps to be taken in order to issue General Fiscal Representation. Before actually physically storing and shipping goods.
Our advise is to do it right from scratch to make sure you will not be faced with negative consequences afterwards.
These duties are well known globally to any company importing or exporting goods to and from foreign countries on different continents. Within the EU the import duties payable on your goods should be the same percentage in any EU-country. This percentage is raised over the declared value or CIF amount (cost, insurance and freight…). In some
cases the import duties are influenced both upwards or downwards by bilateral agreements between the EU and non EU foreign governments. In these cases, mostly special
documents are required. Examples are: Certificates of origin, import licenses when quota are set or anti dumping surcharges on goods which are literally dumped on the European market.
Based on goods descriptions and harmonized codes provided by you, we will be able to determine the amount of duties payable on your products. In some cases we will require the Dutch customs authorities to officialize our interpretations for your own security and liability by asking them for a BTA, Binding Tariff Agreement.
Midl holds a so called license-C customs entrepot. This type of license grants us with the maximum achievable
flexibility. In specific cases we store goods in bond on behalf of our customers. For instance when our customer
re-exports to non EU countries. Since they did not have to pay any import duties upon arrival in the EU, this can
be a significant cost saving...
Customs authorities randomly audits Midl to verify that the right amount of (non customs cleared) goods, are
physically at the right location in our warehouse.
Since Midl is fully AEO Certified, you may conclude this procedure is completely ‘waterproof’.
Bonded storage is however only required in case the amount of duties payable is
high enough to justify the extra handling (customs clearance) charges.
Your cash flow and/or interest advantages should live up to the above described
Consider the value of your goods
Consider the turnover rate of stock annually
Consider the revenue targets outside the EU (Middle East, Africa
and former Eastern European Countries)
LIMITED VERSUS GENERAL FISCAL REPRESENTATION
VAT tax representation has become a familiar phenomenon in logistics Netherlands. Logistics service providers and foreign importers make extensive use of the instrument of
fiscal representation in order to avoid the actual payment of VAT when importing into the EU.
If a tax representative is appointed, it is in conjunction with other tax arrangements for foreign entrepreneurs often possible to import non-EU goods in the Netherlands and
(partly) deliver within the EU without actually paying VAT. The Fiscal representation possibilities of The Netherlands attract numbers of foreign entrepreneurs to choose The
Netherlands as a gateway to Europe. It is also known that tax representation also brings risks with it. Risks, which one should not jeopardize. Especially the representative is exposed, but in a worse case scenario, the foreign entrepreneur can face negative consequences as well. Not to mention the collateral damage to the value of the imported brand.
If it appears that too little tax is paid or the administration appears not to be waterproof, usually the tax representative is liable for the additional tax due.
Despite the fact The Netherlands already experiences tax representatives for over 15 years, there are a lot of do’s and don’ts which might make it difficult to choose between acting as general or limited tax representative.
LIMITED FISCAL REPRESENTATION
GENERAL FISCAL REPRESENTATION
A declining number of logistics service providers act as a tax representative in order
to attract foreign companies to make use of their logistics services. In most cases they
acted as a limited fiscal representative. A foreign entrepreneur can appoint several limited fiscal representatives in the Netherlands all of them with different VAT numbers. The
import VAT does not need not to be actually paid to customs but the amount is deferred
to the VAT number of the limited fiscal representative who declares this through the periodic VAT administration. If all appears to be right, no VAT will have to be paid.
A foreign company can only appoint one general fiscal representative in the Netherlands. The general agent represents the principal in the case of imports from non-EU
goods and the deliveries to the principals’ European customers. The foreign entrepreneur receives its own Dutch VAT number for which is applied to customs by the general
fiscal representative. The representative is responsible for the general VAT formalities
on behalf of the foreign company. For each foreign company the general representative
performs a separate declaration. The administrations are filed separately.
The limited representative is obliged to keep a
waterproof administration of the European deliveries of the imported goods. Where necessary, the
VAT number of the limited agent is used on the
invoices of the foreign company to its European
customers. The Dutch customs require a financial guarantee of limited representative. It usually
involves a bank guarantee.
In case of irregularities, the limited tax representative will be held liable for the underpaid tax,
interest and penalties. The tax inquiry can cover
a maximum of five calendar years. The amount of
the liability is unlimited. This is the most confusing
aspect of the term “limited”. Most foreign companies think their risk is limited but it appears to be
The only advantage of limited fiscal representation is the speed of doing
business. Since the VAT registration number is already established, a
customs clearance is easily made. In case of a ‘one-off’ delivery to a French
VAT registered company of one shipment, which is traceable all the way
and where a proof of delivery is supplied, LFR seems to be a fast and reliable alternative. However a professional LFR will demand a signed EU Power of Attorney from its principal. This must be a European VAT registered,
trustworthy company. The signature of a non-EU registered company has
no legal value, leaving the LFR with unlimited risk. In above example of the
French delivery, the LFR will most likely customs clear and defer the VAT to
the VAT registration number of the French importer.
Although it seems that GFR is time consuming during the start up phase, it
is a much more sustainable solution.
Since on behalf of several different foreign companies customs and VAT declarations
are issued on one VAT registration number (that of the representative), a mistake is
easily made. In case of irregularities of one out of ten customers, the other 9 companies
could be exposed to unlimited fiscal consequences...
The general representative is also obliged
to provide financial security to customs.
However, his liability is limited to the annual
amount of the security, which is determined
by customs. Also in the case of general fiscal representation the period of five calendar years is applicable.
The general fiscal representative is fully
able to determine the maximum risk and
financial exposure to him as well as on behalf of it’s principal.
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Other things of
1. Intrastat list
In case our in
tra- European sa
les exceed appr
mately € 400.
oxi000,- the Dutch
require us to li
st an administr
ation of numbe
values and volu
mes of the goo
ds which have
ved within the
mo European U nio
n, including re
and so on.
This will have
to be done on
a monthly basi
Does the fiscal
partnerl file th
on our behalf
as well? YES!
The tax authori
ties will requir
e a bank guaran
Do we have a D
Does our bank
have an office
in Holland?. CHECK!
In general this
is 1/12th of the
al value into th
e EU *21% (whi
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e tax authoriti
SO if we import an
estimate of EUR 50
0.000 into the EU ,
guarantee should ap
500000/12 = 4166
6,41666 * 21% = € 87
THE PROOF OF THE PUDDING...
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IS IN THE EATING!
When the information and documentation of the previous page is submitted to Midl and Vatko,
we will supply you with the following documents to be filled out and signed:
• Tax Representation Agreement
• Physical Distribution
• Power Of Attorney
• Letter of revocation and withdrawel
• Terms and conditions
• Vatko will apply for a designated VAT number with the Dutch tax authorities. Vatko has
straight communication lines with the several internal teams at the authorities, but you will
have to allow a little bit of processing time.
• Meanwhile, Midl will load the masterdata of your articles in our warehouse management
system. This includes article numbers, descriptions, weights, dimensions, barcodes, batchnumbers etcetera.
• Dutch tax authorities will revert back to Vatko and advise them both the designated VAT number as well as the EORI number. They will also state what the required amount of the bank
guarantee will be for the first year. The tax authorities are entitled to amend this guarantee
when the imported value appears to be higher or lower than estimated at first.
• The bank guarantee for the first year will have to be issued in the name of the Dutch tax authorities.
• For the next year(s), the guarantee will have to be issued in the name of Vatko
• You have to instruct your bank to issue this guarantee. The guarantee is requested to be with
a Dutch bank or with an international bank who has their own entity / office in The Netherlands (for instance the Bank of America) In other cases your (local) bank needs to acquire a
Dutch partner bank who issues a contra-guarantee. The first two options will however proof
to be quicker and more sufficient.
• After receiving the paperwork from your bank, please inform Vatko immediately the guarantee has been issued by your bank. Please send Vatko the relevant copies of the documentation of your bank.
• Vatko will inform the tax authorities that the guarantee is established. The authorities will confirm this and will subsequently activate your VAT number digitally.
• Midl will check if the number is really active by submitting a customs document digitally...
You are all set!
HE IS WELL
Because his suit protects him against small parts of asbestus. His suit was manufactured in Alpharetta, Georgia by a company called Grayling Industries. The group
of companies to whom Grayling belongs, ILC Dover, also manufactures the suits
which are worn by NASA’s austronauts.
Midl and Grayling go back a long time. Midl used to keep Grayling’s inventory
under customs bond. Whenever an order was ready for one of Grayling’s European customers, Midl would arrange the transportation under customs bond, while
arranging the customs clearance in the country of destination. A time consuming
process, which led to an unnecesary long lead time of processing a sales order.
Recently Midl and her partner, Vatko, applied for a designated VAT number on
behalf of Grayling. Now the General Fiscal Representation is in place, the time-tomarket is significantly shortened. This enables European importers to buy smaller amounts of Grayling’s product whilst not having to go through the hassle of
customs clearance on their behalf.
WHO ELSE LAUNCHED?
A growing number of foreign entrepreneurs choose to outsource
both their logistics as well as their general fiscal representation.
Reasons are obvious. They are not confronted with monthly recurring fixed costs for real estate, staff and other financial obligations.
When combining logistics outsourcing and fiscal representation,
you create a ’best-of-both-worlds-scenario’.
In order to choose the best scenario, you should alway check what
the best (fiscal) scenario will be in your specific case. Therefor feel
free to contact us. We give you an objective advise which will proof
to be the best for both short- and long term.
You may also verify this with the companies listed below!