Shipping cross-border to European markets outside of the European Union means dealing with varying rules that can make it confusing to know about customs clearance, the required paperwork, taxes, and duties.
How are customs duties and taxes calculated?
Understanding the difference between duties and taxes is key. Duties are a type of tax charged on goods that enter or leave a country. Taxes are charges placed by the importing country on almost all purchases. Both duties and taxes contribute to the total cost of the product.
Duties are collected by customs as government revenue. In the simplest of terms, they protect local industries that make the same type of goods by increasing the cost to the customer. Most duties are paid by the importer and added to the cost of the goods sold, including the shipping and handling charges and any insurance.
Taxes are also collected by customs when goods enter a country, and they are paid by the importer. They may include sales tax, value-added tax (VAT), and goods and services tax. Rates will vary by country and are also charged based on the cost of goods sold, freight, and other expenses.
All duties and taxes are based on the tax rates of the destination country and the details listed on your invoice as previously mentioned, including the type and value of the goods, the weight, and the country of origin. Missing information on the invoice can delay shipments and result in incorrect amounts being charged.
Retailers calculate their duties and taxes using the destination country’s published rates. Rates vary based on the type of goods and can be found on government websites for each country. Both duties and taxes are paid before goods are released from customs, which is a major reason to have a reliable customs clearance partner.
Which countries in Europe have customs borders?
With the advent of Brexit, some important changes have occurred. The United Kingdom is now considered a “third country” and therefore not part of the EU economic structures. Switzerland is also a non-EU country, but as a member of the European Free Trade Union, it has simpler, although specific, rules for shipments into the country.
Shipping to Switzerland requires declarations, including the data listed above. However, there is no value-based customs duty. Instead, retailers pay based on weight and tariff numbers. The exception is that customs duties are required on products manufactured outside of the EU. Also, for non-Swiss companies, registration is required on sellers with global sales over CHF 100,000. It's important to note that starting January 1, 2024, Switzerland will eliminate import customs duties on industrial goods.
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