Importing and selling products in the EU, using a non-EU company, is possible. However, doing so requires that you get get a VAT and EORI number, and pay import taxes. You’ll also need to decide in which EU member country to register your non-EU company.
The hardest part is often knowing where and how to get started, but this guide by Munish Gupta, founder of Supply Chain Advisory Group, covers everything you need to know at an early EU market entry stage.
How can non-EU companies get EORI registered?
Non-EU companies do not need a full-fledged tax entity to import products into the European Union. You get set up as a foreign importer with a VAT/EORI number in one of the 27 EU member states.
Once you have the VAT/EORI number from a member state, you can import products into that member state, store them in a local warehouse in that member state and fulfill product to customers all over the EU. You do not have to pay any income taxes in the EU, and you also do not need a bank account in the EU.
EORI or Economic Operator Registration Identification is basically a method for tracking exports and imports within the EU so any shipments can easily be identified by customs. All Non-EU companies need an EORI number when importing or exporting any commercial cargo from or to any country outside the EU.
How can non-EU companies get VAT registered?
Let’s use the Netherlands as an example. Most of the foreign companies get set up with a VAT number in the Netherlands. This is because the Netherlands has the most tax-friendly structure and the most advanced logistics warehouse infrastructure in Europe.
The EORI number is linked to the VAT number. However, based on your requirements, you can get set up in any of the 27 EU member states in the process is quite similar to that of getting a VAT number in the Netherlands.
We will file the VAT/EORI registration paperwork on your behalf and both the paperwork, and the process is quite easy. It takes about 2 months to get the VAT/EORI numbers in any EU member state.
The beautiful thing is that a company set up as a foreign importer has net zero tax liability. Let me try this with an example.
You import products into the Netherlands at the manufacturing price of €100 (say). You pay 21% import VAT = €21 on this to the Netherlands Government. Your customs broker will pay on your behalf.
Now you sell the product at the sales price of €280 and charge €20 for shipping to the end customer. The total cost to the end customer is €300.
If it is a B2C customer, you charge them 21% VAT on the sales price i.e., €63 and you pay the VAT collected from the end customer to the government at the end of the quarter.
When we file your VAT return at the end of the quarter, the amount that you collected from the customers €63, is given to the government and the import VAT of €21 is refunded to you. You end up paying €63 -€21= €42 to the tax authorities
Can non-EU companies pay import duties in the EU?
Customs duties and taxes are different though they are often used interchangeably. Customs duties vary based on product characteristics, but VAT tax rates are fixed and are calculated on the total value of the product imported into the country. Custom duties are non-refundable, but the import VAT paid is refundable.
Upon successful registration, you will be issued a VAT number and an EORI number by the Netherlands tax authorities. To reclaim the import VAT, you need to use your own VAT number and EORI number while importing products into the Netherlands.
How can non-EU companies pay import duties and VAT?
With the VAT/EORI numbers, your company is the Importer of Record (IOR) and must pay import duties and taxes. Your customs broker pays the import VAT at the time you import the product into the country with your VAT/EORI number.
We will guide you on the process.
Do foreign importers of record exist in the EU?
With the VAT/EORI numbers, your company is the Importer of Record (IOR) and must pay import duties and taxes. Yes, non-EU companies can act as the IOR.
Is there anything else that non-EU companies should consider before importing goods into the EU?
Apart from VAT considerations, a company expanding into Europe should look at the following two things:
Regulatory compliance: If you do not have the necessary compliance certification, your product might get stuck at customs. For compliance, Compliance Gate can help.
Necessary logistics infrastructure: You must make sure that you have the freight forwarder, customs broker, local warehouse partner that can send products to your EU clients. Supply Chain Advisory Group (SCAG) can help in this area.
What do I need to prepare before setting up an EU supply chain?
We will try to understand the following from you:
1. Complete supply chain scenario
2. Country where you have the most customers in the EU
3. Location of your EU warehouse.
Based on that we will suggest a country where you should apply for the VAT and the EORI number. Most of our clients prefer Germany, France, or the Netherlands. Please note that the UK is no longer part of the EU.
How can Supply Chain Advisory Group help with this process?
Supply Chain Advisory Group is a consulting company helping technology and e-commerce companies in their complete logistics services and in international expansion into over 50 countries.
We help our clients and set up properly for import logistics and GST/VAT as a foreign importer in countries such as Australia, New Zealand, Canada, 27 EU countries, Japan, Singapore, UAE, and the UK, We work with leading technology incubators/accelerators/VCs and their portfolio companies leading e-commerce companies on complete global logistics/supply chain.
The best way to achieve scale is to go international. International “cross border” commerce is growing exponentially, and we provide “end to end” services such as international entity set up (taxation, VAT, payroll etc.) customs clearance, transfer pricing, international 3PL warehousing, freight forwarding (ocean/air/truck/parcel freight), & overall global supply chain management across all channels (B2C, B2B, Marketplaces such as Amazon etc.)
SCAG’s founder Munish Gupta is a Wharton MBA/UCLA Electrical Engineer and worked in global corporate global supply chains (including Overstock.com) for 15 years before branching out on his own. International trade is in his blood, and he has travelled to over 80 countries he has written extensively in Asia, Europe and North America and speaks 5 ½ languages.
He can be reached at: munish@sc-advisory.com
Fredrik you made a good guide, really in order to scale you really need to use tools that will provide automation of procurement, control and other business processes related to management. Here https://fluix.io/industry-marine you can keep track of all the documentation you need for a successful import process