Brexit being in effect since January, 1st 2021, B to B transactions are no longer considered as intracommunity movements. As a result, these transactions are considered as imports and exports between the EU and UK. This means that VAT and duties need to be paid on imports in the country of import. The question arises which of the parties will be taking care of this additional workload and responsibility, specifically regarding transport, insurance, exporter/importer of records (so potential liability and checks with the customs) fiscally and of course financially.
From a commercial point of view, a client would not want to have more administrative burden because of Brexit. Therefore, we believe suppliers should offer to work on DDP basis with their client, as a part of their service. DDP incoterm means “Delivery Duty Paid”.
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What is DDP incoterm?
DDP incoterm means “Delivery Duty Paid”. This means that you will take care of the transport of your goods yourself. Moreover, you will take care of the customs formalities in France and become the "Importer of records" in France. This means (depending of the country of arrival of goods):
- you take care of the transport of your goods
- you take care of the customs formalities in EU / UK
- you become the Importer of records in EU / UK.
This takes the customs administrative burdens and costs away from your customers, but your company will need to appoint a customs agent in the EU so that goods are cleared in your name. Make sure to have this conversation with your customers and have clear agreements on the responsibility of you as a supplier and your client as the receiver of the goods.
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What are the possible scenarios?
The scenarios here below are based on the assumption that your company does not have a fixed establishment in the country of arrival of the goods. Your business is considered as a foreign company, established in another country if certain criteria are met. This could for example be the case if you have in your warehouses or offices in this country with employees working for your company in this country and / or decision makers present in the country of arrival. A detailed analysis must be carried out on this subject. We strongly recommend that you contact us if you have any doubts about this.
"I am a UK based business, selling to French clients and to EU customers but France. How can I continue to sell to my EU customers?"
Your company sells DDP to French companies :
- You have the obligation to register for French VAT,
- You need to obtain an EU EORI number (as your GB EORI number is no longer valid within the EU),
- You need to appoint an accredited customs agent or broker on both sides of the channel,
- You have to pay customs duties and VAT on import in France
- A refund request for the VAT paid (except import VAT) can be submitted through the refund procedure (13th directive).
- The refund procedure is available on a quarterly basis,
- You will invoice your French customers without VAT (mandatory domestic reverse charge mechanism),
Your company sells DDP to non-French companies only :
- You don't have the obligation to register for French VAT, as there is also a possibility to use the specific customs regime 4200,
- You need to obtain an EU EORI number (as your GB EORI number is no longer valid within the EU),
- You need to appoint an accredited customs agent or broker on both sides of the channel,
- You have to pay customs duties and VAT on import in France
You can also choose to register for VAT in France if you would like to benefit from the import VAT deferment so that you don’t have to make advance payments of VAT to the customs broker. (in this case please see next case).
"I am a UK based business, selling to French clients and to EU customers but France. How can I continue to sell to my EU customers?"
If you import in France under DDP and sell to companies in other EU countries:
- You have the obligation to register for VAT in France
- This allows your company to deliver to other EU member states (Intracommunity sales)
- You need to obtain an EU EORI number (as your GB EORI number will no longer be valid within the EU),
- You need to appoint an accredited customs agent or broker.
- You will pay customs duties only.
- VAT on import will be reverse charged in your VAT return,
- No need to advance payment of the Import VAT.
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