Import with DDP to Belgium
In the dynamic world of international trade, a nuanced understanding of the various terms and conditions that govern the movement of goods across borders is indispensable. In this article we are focusing on importing goods to Belgium with the DDP Incoterm (Delivery duty paid). We are explaining what the DDP Incoterm entails, why it could be a good choice for your imports and what you should remember about when using it, when it comes to your VAT obligations in Belgium. As we unravel the layers of import with DDP to Belgium, our aim is to equip businesses with the knowledge needed to make informed decisions, mitigate risks, and optimize their international trade operations.
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What are incoterms ?
Incoterms, short for International Commercial Terms, are a standardized set of trade rules established by the International Chamber of Commerce (ICC) that define the responsibilities and obligations of buyers and sellers in international transactions. These terms provide a common language for parties involved in the global supply chain, specifying who is responsible for the costs, risks, and logistics at each stage of the shipping process. Incoterms are reviewed every 10 years, and the incoterms currently in force are those from 2020.
Import with DDP to Belgium : what is the DDP Incoterm
Among the Incoterms, the DDP (Delivered Duty Paid) Incoterm stands out for its comprehensive nature.
In a DDP arrangement, the seller assumes maximum responsibility, covering all costs and risks associated with delivering the goods to the buyer’s specified location in the destination country, in this case, Belgium. The seller takes care of not only transportation and freight charges but also customs duties, taxes, and any other expenses until the goods are delivered at the agreed-upon destination. On the flip side, the buyer’s responsibilities are minimal, typically limited to receiving the goods at the designated location.
The DDP Incoterm, therefore, offers a turnkey solution for buyers, streamlining the import process by placing a significant burden on the seller to ensure a smooth and hassle-free delivery experience for the buyer.
Advantages and disadvantages of using the DDP Incoterm to import goods to Belgium
Using the DDP Incoterm to import goods to Belgium as a seller may come with many benefits as well as inconveniences. It is important to consider both before deciding on the right Incoterm for your import to Belgium.
Advantages of using the DDP Incoterm for Sellers:
- Market Penetration: The seller can expand its market presence by offering a comprehensive package that includes transportation, insurance, and customs clearance. This can be attractive to buyers who prefer a hassle-free purchasing process.
- Competitive Edge: Providing a DDP service may give the seller a competitive advantage over other sellers who offer less comprehensive shipping arrangements. Buyers may be more inclined to choose a supplier that takes care of all logistics and customs formalities.
- Reduced Buyer's Risk: The seller assumes the risks associated with transportation, customs clearance, and delivery to the buyer's location. This reduces the buyer's exposure to potential issues during the shipping process.
- Clear Cost Structure: The seller can provide the buyer with a clear and predictable cost structure, as all shipping, customs duties, and other charges are included in the quoted price. This can make budgeting and financial planning easier for the buyer.
- Streamlined Logistics: Since the seller is responsible for the entire logistics chain, including customs procedures, they have more control over the shipping process. This can lead to better coordination and potentially faster delivery times.
Disadvantages of using the DDP Incoterm for Sellers:
- Higher Costs: The seller is responsible for covering all costs associated with transportation, customs clearance, and delivery to the buyer's location. This may result in higher overall expenses for the seller, including unpredictable import duties and taxes.
- Necessary VAT registration: When importing goods to Belgium, the seller is obliged to register to VAT to Belgium and file VAT returns regularly. This may be an additional cost and responsibility for the seller
- Complex Customs Compliance: Compliance with the customs regulations in Belgium can be complex and challenging. Sellers need to stay informed about changes in regulations, documentation requirements, and tariffs in the destination country, which may require additional resources and expertise.
- Customs Valuation Challenges: Determining the correct customs value for the goods can be challenging, especially if there are complex pricing structures, discounts, or other factors. Incorrect valuation can lead to customs delays and additional costs.
- Potential for Disputes: If issues arise during the customs clearance process or with the delivery of goods, there may be disputes between the buyer and seller regarding responsibilities and liabilities. Resolving such disputes can be time-consuming and costly.
- Delayed Payments: Since the seller is responsible for all costs, including duties and taxes, the buyer may delay payment until the goods have been cleared through customs and delivered. This can impact the seller's cash flow.
What are the conditions & responsibilities for importing with DDP to Belgium
When a seller chooses to use the Delivered Duty Paid (DDP) incoterm for importing goods into Belgium, it means that the seller is responsible for delivering the goods to the buyer at the agreed-upon place of destination in Belgium, bearing all costs and risks, including duties and taxes.
Here are the key conditions and responsibilities for the seller in a DDP arrangement for importing goods into Belgium:
- The seller is responsible for delivering the goods to the agreed-upon location in Belgium, as specified in the sales contract.
- The seller must organize and pay for the entire transportation process, including inland transportation, shipping, and any other necessary modes of transport.
- The seller is responsible for handling all customs formalities and obtaining any required export licenses or permits from their own country.
- The seller must also manage the import customs clearance process in Belgium, including submitting the necessary documentation to Belgian customs authorities.
- The seller is responsible for paying all duties, taxes, and other charges applicable to the import of goods into Belgium. This includes both import duties and VAT (Value Added Tax).
- It's crucial for the seller to accurately calculate and cover these costs to ensure smooth customs clearance.
- The seller bears the risk until the goods are delivered to the agreed-upon destination in Belgium. This includes the risk of loss or damage to the goods during transportation and customs clearance.
- While not a mandatory requirement of the DDP incoterm, it is advisable for the seller to provide insurance coverage for the goods during transportation to protect against loss or damage.
- The seller must ensure that the goods are delivered in conformity with the contract, including specifications, quantity, quality, and packaging as agreed upon with the buyer.
- Effective communication between the seller and the buyer is essential to ensure a smooth import process. The seller should provide the necessary information and documentation to the buyer to facilitate customs clearance on the Belgian side.
- The seller must be aware of and comply with Belgian customs regulations, import restrictions, and any other applicable laws governing the importation of goods into Belgium.
It’s important for the seller to carefully review the terms of the sales contract and clearly understand their obligations under the DDP incoterm. Additionally, consulting with logistics professionals and legal experts with knowledge of Belgian customs procedures can help ensure compliance and mitigate potential challenges.
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Customs clearance for non-EU companies
Non-European companies may encounter problems with DDP customs clearance. In order to appear as an importer on customs documents in box 8, these companies must work with a customs agent offering indirect customs representation. A Belgian VAT number via a responsible representative is therefore not always sufficient.
Import with DDP to Belgium: Direct representation for EU companies
- In direct representation, the declaration has been drawn up by a customs agent, acting in the name and on behalf of a third party.
- The choice of direct representation appears in boxes 14 and 54 of the import document
- The identity of the customs agent appears on the document in box 14
- The importer’s identity appears on the document in box 8.
Import with DDP to Belgium: Indirect representation for non-EU companies
- In indirect representation, the declaration is drawn up by a representative (customs agent) acting in his own name and on behalf of company XYZ established outside the European Union.
- The choice of indirect representation appears in boxes 14 and 54 on the import document
- The identity of the representative appears in box 14 on the document;
- The identity of the non-EU company XZY appears on the import document in box
Import with DDP to Belgium vs VAT compliance: case studies
In order to help you understand how importing with DDP incoterm to Belgium may impact you when it comes to VAT Compliance in Belgium, we have prepared two case studies of different types of transactions. We are explaining which import procedures would be best for you and how to handle import VAT payment.
Business model : A German company ABC imports shoes to Belgium, stores them in a Belgian warehouse and sells them to consumers in Belgium (both B2C and B2B sales).
VAT rules for importing : First and foremost the company ABC will have register to VAT in Belgium. The correct import procedure to use is the procedure 40 00 which is the standard import procedure used when the goods are released for consumption in Belgium. The company ABC will need to pay import VAT tax (in this case the applicable rate will be 21%) together with the customs duties. This import VAT will be recovered by the company after filing a periodical VAT return in Belgium.
The company ABC has the possibility to defer the payment of import VAT tax by using the License ET 14 000 – this way they will not have to pay the import VAT tax at the time of the import, they will only need to declare it in their periodical VAT return. To learn more about the License ET 14000 read our article : ET 14000 license : Import VAT deferment system in Belgium
Business model: A Czech company XYZ imports furniture to Belgium and then resells them to other companies in EU countries. The goods that will not be sold will be moved to the company’s warehouse in Czech Republic. None of the goods will stay in Belgium
VAT Rules for importing: Company XYZ will register to VAT in Belgium in order to be able to import goods. They will use import procedure 42 000 that will allow them to defer the payment of Import VAT. By using this procedure, company XYZ will be obligated to move the entirety of goods outside of Belgium in the next 30 days after import. They will also need to indicate VAT numbers of the companies the goods will be sold/transferred to.
The company XYZ will need to file periodic VAT returns in Belgium and declare the imports as well as the Intra-community sales. No VAT will be paid or recovered.
Import with DDP to Belgium: Conclusion
As you can see, importing goods to Belgium using the DDP Incoterm may be very beneficial to companies selling goods in Belgium and the European Union. However, it does come with its challenges therefore it is crucial for businesses to carefully asses their business situation and responsibilities that come with Importing to Belgium with DDP incoterm. We hope that our article helped you a little bit with understanding those. As always we are eager to help businesses make informed decisions so do not hesitate to get in touch with us and schedule a free consultation !
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Rising VAT rockstar at Eurofiscalis I have a passion for unraveling the complexities of VAT regulations in the European Union (especially Benelux region). My mission is to empower readers to navigate the ever-changing VAT landscape with ease and to answear your questions in a clear and concise way.