How can I save value-added tax when conducting cross-border transactions?
January 21, 2022 | 45,00 EUR | answered by Friedhelm Sauer
Dear tax consultant,
My name is Irmgard Netz and I operate a medium-sized company that is active in the online trading sector. Lately, we have been conducting more cross-border transactions and have noticed that value-added tax represents a significant cost factor. We would like to know how we can save on value-added tax in cross-border transactions in order to maximize our profits.
Currently, we have to pay the respective value-added tax on each import and export, which significantly impacts our margins. While we can reclaim input tax, this is often associated with bureaucratic effort and leads to liquidity delays. Additionally, we are unsure if we are utilizing all opportunities to save on value-added tax.
Our concern is that value-added tax costs could continue to rise and potentially affect our competitiveness. Therefore, we would like to know if there are legal and effective ways to save on value-added tax in cross-border transactions without violating tax laws.
We would appreciate it if you could provide us with concrete solutions and recommendations that allow us to reduce the burden of value-added tax in cross-border transactions. Thank you in advance for your support and expertise.
Sincerely,
Irmgard Netz
Dear Mrs. Netz,
Thank you for your inquiry regarding value added tax in cross-border transactions. Value added tax can indeed be a significant cost factor, especially in import and export transactions. It is important for you to familiarize yourself with the applicable regulations in order to minimize the burden of value added tax and maximize your profits.
One way to save on value added tax in cross-border transactions is to utilize so-called intra-community supplies and acquisitions. In this case, value added tax is not due upon import or export, but only upon delivery to the end customer in the destination country. Certain conditions must be met for this, such as correctly handling transport routes and fulfilling all documentation requirements. It is important for you to seek legal advice to ensure that you meet the requirements and avoid any tax risks.
Furthermore, you may consider the option of customs warehousing. This involves storing goods in a customs warehouse, with value added tax only being due upon withdrawal of the goods. This can help preserve liquidity and avoid delays in reclaiming input tax.
Another approach to saving on value added tax in cross-border transactions is to use chain transactions. In this case, goods are transported directly between different companies within the EU without being stored in between. In such cases, the value added tax liability can be transferred to the end customer, allowing you to reduce the burden of value added tax.
It is important to note, however, that the mentioned options for saving on value added tax come with certain risks. Therefore, it is advisable to seek advice from an experienced tax advisor to ensure that you comply with all legal requirements and avoid any tax risks.
I hope this information has been helpful to you. If you have any further questions or require more detailed advice, I am at your disposal.
Kind regards,
Friedhelm Sauer
