Fiscal representation, customs and vat from a sales perspective

1. Customs & VAT
From a sales perspective
Michel de Haas, Group Customs & Trade Compliance Senior Manager

2. 2 | DSV – June, 2016
Scope
We sell a wide scope of logistic solutions across the globe and once implemented the
operation we have ongoing customs consequences;
supplier
end-
customer
supplier /
distributor
carrier
port of
arrival
transport
port of
departure
1. From a duty point of view (levy, €) – fiscal
2. From an economic, a protection and a security point of view – non-fiscal

3. 3 | DSV – June, 2016
Scope
Indirect taxation:
• Import duties & related
• Tax (VAT)
• Excise
Fiscal Duties
VGEM :
• Safety
• Health
• Economy
• Environment
Non-fiscal Duties
Besides specific purpose also another means to control
input, process and output streams. VB import , transit
and export , import restrictions , quotas, product ,
counterfeiting, environmental requirements , flora and
fauna etc.

4. 4 | DSV – June, 2016
• The Netherlands, gateway to Europe.
• EU consists of 28 European countries,
sharing identical or similar trade regulations.
• This means free trade within all 28 countries
of the EU, no internal borders (for customs):
- One general Customs Code;
- Similar, almost identical VAT regulations
- One common trade policy
- NO internal customs formalities and controls
• Customs clearance on EU border
• Van “aankomst” naar “winkel” is een reeks van
vastgelegde en voorgeschreven processen;
• Dat loopt via DSV of een van de andere
betrokkenen
European Union
European Union = Customs Union
Non-EU flow

5. 5 | DSV – June, 2016
European Union
Customs
1. Placing of goods under a customs procedure;
• bring the scheme into free circulation
• Transit
• the customs warehousing procedure
• inward processing
• processing under customs control
• temporary importation
• outward processing
• Export
2. Entry of goods into a free zone or free warehouse
3. Re-exportation from the customs territory of the EU
4. Destruction of goods
port of
arrival
supplier /
distributor
transport
end-
customer

6. 6 | DSV – June, 2016
European Union
Customs
Most common process:
• port (after release)
• pick-up (DSV, 3 rd party)
• under transit (DSV, 3rd party)*
• warehouse (DSV, 3rd party)
* direct warehouse possible, DSV licensed
PORT transport DSV

7. 7 | DSV – June, 2016
Shipments of goods arriving in Europe:
1. Goods are cleared immediately (port) or
semi-immediately, clearance on arrival
2. Goods are stored in bonded warehouse,
clearance on outbound order
3. NO clearance at all, transit in Europe
(bonded shipment/NCTS)
- T-doc system, clearance and closing closely
monitored on operational site-level for
riskmanagement purposes
Doing business in Europe

8. 8 | DSV – June, 2016
European Union
Non-EU Sourcing Clearance upon arrival Free storage
Or direct distribution
Bonded storage
Clearance on outbound
Transit/ bonded
export outside EU

9. 9 | DSV – June, 2016
• Customs clearance on arrival
– using Sagitta/AGS system for electronic clearance
and communication with Dutch Customs;
• Customs clearance on outbound
– (using bonded warehouse), fully automated in
‘GPA’ (= abbr. of automated periodic duty return).
Monthly report and payment to Customs. Most
of relevant information (a joint effort of customer
and DSV) implemented in system.
European Union
Customs

10. 10 | DSV – June, 2016
Relevance for you:
• Good inventory of what is asked, whether or
not (timely) arming customs specialist ( e.g.
using a questionnaire)
• Realise that not always EVERYTHING (
equal) OR is possible that additional
measures must be taken
• We do - in principle – NOT do brokerage
unless we have real prospects of transport
and/or logistics
• Cost -efficiency hinges on how customs
information is supplied (loose, EFI, email,
system downloads etc).
European Union
Customs

11. 11 | DSV – June, 2016
Regardless of the chosen clearance set-up
(Sagitta/AGS or bonded warehousing/GPA),
duties are based on three important elements:
1. CLASSIFICATION (HS code) and related
tariff
– Classification is based on the goods themselves,
technical aspects, description, use
2. Customs VALUE
– Value is transactional value, value according to
first transaction into Europe, which includes price
paid, costs of insurance, transportation until place
of importation, paid commissions etc.
3. ORIGIN of the goods
– Origin is important for use of proper (preferential)
tariffs
All three elements require close cooperation during initial
setup and frequent monitoring when continuously using
HS-coding and value for products. This is part of DSV’s
internal control procedures.
European Union
Customs

12. 12 | DSV – June, 2016
Importation also triggers VAT (value added tax) because four main activities are actually VAT liable:
1. Import(s)*
2. Actual supply of goods*
3. Providing or rendering services
4. Intra-Community acquisitions
(Netherlands 21 or 6 %, but in cross-border situations reversed charged / 0% …)
* Foreign companies most common and regular activities
Value Added Taxation
VAT Is the Value Added Taxation on prices an
entrepreneur charges to its customers for the
supply of goods or for providing services

13. 13 | DSV – June, 2016
• System of VAT focuses on the VAT being
charged to END-consumer
• Companies importing and delivering to other
(VAT registered) companies (B2B), may have
VAT exemption, or VAT is charged but
reclaimed
• When selling to end-consumers (often private
individuals or non-registered companies) VAT
is being charged
European Union
The system in general
0%
0%
0% 0%
0%
23%
25%

14. 14 | DSV – June, 2016
European Union
Standard transaction in supply chain, FOREIGN company fiscally represented, B2B
Private
individual
Company
21%
reverse
charged,
0%
Private
individual
Company
Company
19%
19%,
but
refund
Private
individual
19%
Germany
Company
Spain
VAT 0% VAT 0%
or VAT 0%

15. 15 | DSV – June, 2016
• A non-resident trader, not having a Dutch based company or permanent establishment/branch
office, performing VAT taxed activities in the Netherlands (like import) should pay VAT on
importation, unless the company appoints a fiscal representative. Only for companies using
fiscal representation, VAT deferral on import (exemption) is available!
• Advantage, doing business in Europe operating similar to a (residing) European company, by just
selling from EU distribution centre storage, no corporate tax issues. Reduced lead times to
customers, operate as a direct European competitor.
• Non-resident trader has to meet (and to keep up with) all legislative and tax law requirements, but
in order to do so, appoints a fiscal representative familiar with local law and legislation.
• Fiscal representative takes care of VAT related administrative services and shares VAT
responsibility with non-resident trader. The fiscal representative provides guidance in EU VAT
requirements and supports administrative process.
A non-EU resident trader

16. 16 | DSV – June, 2016
A non-EU resident trader
• For import and subsequent transaction only
• No own registration (you use DSV’s VAT#)
• Application of VAT deferral system at
importation
• Authorisation from tax authorities
• Authorisation from client
• Liability of limited fiscal representative is
unlimited
• Guarantee to LFR (unless decided differently)
• For import, intra-Community acquisitions
and sales to private individuals
• Own VAT registration
• Guarantee to authorities
• Application of VAT deferral system at
importation
• Authorisation from tax authorities to general
fiscal representative
• Authorisation from client to general fiscal
representative
• Liability of general fiscal representative is
limited to the amount of the guarantee
Two options to choose from
General fiscal representativeLimited fiscal representative

17. 17 | DSV – June, 2016
Customs Services & Fiscal Representation
1 An effective and efficient supply chain;
2 Having the lead on all aspects, including delivery;
3 Strenghtening relation with customer;
4 Better market position as competitor;
5 Better leadtimes (no delay in administrative process);
6 Acting as a ‘EU company’
7
Better inventory management (a smooth operation may increase more frequent ordering,
reducing inventory levels for customer);
8 Exempted VAT on import, cashflow benefit;
9 In case of fiscal representation NO handling, administrative burden i.e. extra costs for customers
What is in it for non-EU suppliers?

18. Doing business in Europe
Business to Consumer (B-2-C)

19. 19 | DSV – June, 2016
VAT - European Union
Business to Consumer – B2C

20. 20 | DSV – June, 2016
Distance selling in the EU occurs when a supplier in one EU member state (for instance from a DSV
Solutions warehouse in the Netherlands) sells goods to a person in another member state who is not
registered for VAT (mostly private individuals) and the supplier is responsible for the delivery of the
goods. You can think of mail order sales or goods ordered over the internet .
Under the distance selling arrangements, sales to customers in other member states who are not
registered for VAT are liable to VAT in the Member State of the supplier provided that the (turnover)
threshold appropriate to the Member State of the customer is not breached. Where sales exceed the
threshold in any particular Member State, the supplier must register and account for VAT in that
particular Member State.
Apart from the demanding logistics in this (retail) supply chain, DSV – in co-operation with a business
partner – offers a solution for ‘unburdening’
Distance sales in the EU
What is distance selling?
B2B = sales to VAT registered companies, distributors
B2C = sales to private individuals

21. 21 | DSV – June, 2016
European Union - Normal VAT regulations
Standard transaction in supply chain, B2B
Private
individual
reverse
charged,
0%
Company
Germany
Company
SpainNetherlands
VAT 0% VAT 0%
or VAT 0%

22. 22 | DSV – June, 2016
European Union - Distance selling VAT regulations
Transactions with private individuals, B2C
21%
21%
Private
individual
Private
individual
21%
Germany Spain
Private
individual
Netherlands
Private
individual
Private
individual
21%
21%
Invoices to Dutch consumers with 21% Dutch VAT !!
VAT reporting in Netherlands for import, B2B and Dutch consumers !!

23. 23 | DSV – June, 2016
European Union
Distance Selling
€35,000
€35,000
€100,000
£70,000
€35,000
SEK320,000
€35,000
€35,000
€35,000
BGN 70,000
RON 188,000
€35,000
€35,151
LVL24,000
LTL125,000
PLN160,000
€100,000
CZK1,140,000
€35,000€35,000
DKK280,000
HUF8,800,000
• European Union, thresholds
• Exceeding thresholds = VAT applicable of
country of destination

24. 24 | DSV – June, 2016
European Union
Transactions with private individuals B2C (AFTER exceeding thresholds)
21%
19%
Private
individual
Private
individual
21%
Germany Spain
Private
individual
Netherlands
Private
individual
Private
individual
Invoices to Dutch consumers with 21% Dutch VAT
VAT reporting in NL for import, B2B & Dutch
consumers
Invoices to German consumers with 19%
German VAT
VAT reporting in Germany for German B2C
Invoices to Spanish consumers with 21%
Spanish VAT
VAT reporting in Spain for Spanish B2C
By DSV
By third party, but data
to be provided by DSV
By third party, but data
to be provided by DSV
VAT registration VAT registration

25. 25 | DSV – June, 2016
1. Initial setup / contract / bond; who is
importer of record
SETUP fee , monthly fee
2. Compliance – a.o. invoicing requirements
3. INCO terms
4. Direct shipments (passing by NL’s), B2C
issues
5. Verhuizingen (stock-movements)
6. NL is rapidly losing VAT deferral advantages
...
From Practice…

26. 26 | DSV – June, 2016
7. GFR better than LFR AND threshold to LFR
feels, given security is almost gone ;
8. GFR can never duplicate and therefore not a "
takeover " GFR (for example, two service with
GFR is impossible)
9. GFR LFR can possibly be ( two service BUT
administratively complex and risky in case of
identical goods )
10.LFR may double ( two service BUT
administratively complex and risky in case of
identical goods )
From Practice…