Importing from China

L

Lak

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Could anyone advise me as to what my legal obligations are for shipping a consignment from China, tax wise, in this instance they are greenhouse's 200 in number.

Thankyou in advance.
 
I would recommend you talk to a solicitor for this advice. In this instance, I would recommend a firm in Dublin called Clerkin Lynch. They regularly advise on specific Chinese matters, they are on the Ireland-China Commerce Chamber here in Dublin and they also have an office in Shanghai which assists irish companies who are looking to import from China.

For the record, I simply know the partners in the firm but have no commercial arrangements with them for referrals so this is a genuine recommendation based on their specific experience in this area.
 
Hello Legs-akimbo

In relation to import duty and taxes, the following is an outline.

1) Depending on the description of the commodity, the materials used etc, the goods will have to be classified from a customs point of view. Based on the summary description you indicate, I believe the Customs Tariff nr is 9406003100. That would be subject to verification, but if correct the rate of duty is 2.7%.
2) The Duty is calculated over the cost of the product (invoice value) plus freight cost and marine/cargo insurance.
3) VAT, currently 21%, is calculated over the the above plus duty. If you are a VAT registered trader the VAT paid at the point of entry is a deductible input and reclaimable through your VAT return.

A few general comments when doing business in China ;

1) Make sure you research your supplier. Eamo Keating's suggestion of using a solicitor, especially one with an office in Shanghai and obvious experience in dealing with China trade is an option. Another option is to talk to specialist companies that source products on behalf of Irish clients in China. They could do background checks on your prospective suppliers and perform pre-shipment inspections in the factory
2) Take charge of the shipping process. Check the cost of shipping by contacting forwarders based in Ireland who offer services from China. I have seen horror stories where the shipping was left to the supplier, who got an unrealistically low rate and where the chinese forwarder, through the agent in Europe / Ireland collected the difference (and then some) in the form of a socalled "China Import Service Fee" on arrival. The problem at that stage is that you are committed. You have paid for the Merchandise, the supplier does a song and dance but claims to be helpless in all this and you have no choice but to pay up. The principle "Emptor Caveat" applies.
3) Incoterms ; When negotiating an international sales contract, both parties need to pay as much attention to the terms of sale as to the sales price. To make it as clear as possible, an international set of trade terms (INCOTERMS) has been adopted by most countries that defines exactly the responsibilities and risks of both the buyer and seller including while the merchandise is in transit. Devised and published by the International Chamber of Commerce, Incoterms are at the heart of world trade. Among the best known are EXW (Ex works), FOB (Free on Board), CIF (Cost, Insurance and Freight), DDU (Delivered Duty Unpaid), and CPT (Carriage Paid To). ICC introduced the first version of Incoterms - short for "International Commercial Terms" - in 1936. Since then, ICC expert lawyers and trade practitioners have updated them seven times to keep pace with the development of international trade.
4) Marine Cargo insurance is often a forgotton / overlooked aspect. A lot of shippers and consignees assume that the carrier - since they are in charge of the goods during the shipping process - has the obligation to make good losses in case of damage or theft or total loss. Under International conventions (such as the Hague Visby rules, soon to be replaced by the Rotterdam rules) the carriers can (and will) rely on limitation and exclusion clauses as part of the terms and conditions they impose through the shipping contract (Bill of Lading). Even if they have to accept liability, their maximum liability is often only a small fraction of the actual value of the goods. Make sure that General Average is included in the policy you take out.

Feel free to contact me or post again if you need any further assistance

Cheers,
Rudolf289
 
Hello Legs-akimbo,

one point in relation to VAT at the point of entry. You are able to take advantage of EU legislation and structure your imports in such a way that you account for the VAT liability in your VAT return and claim the deductible at the same time. This is a process called postponed accounting.

Most if not all imports by sea from outside the EU tranship at other EU ports like Rotterdam and Antwerp (sometimes Le Havre or Felixstowe) before they arrive in Ireland. That provides the opportunity to clear the goods at the point of transhipment and bring them into free circulation in the EU (you need to pay the duty at that stage). From then on you can treat the transaction as an Intra EU acquisition and account for the VAT liability through your periodic VAT return.

This is likely to have a positive impact on your cashflow as this does not require you to pay the VAT at time of importation and then wait for your next VAT return to claim it back.

Regards,
Rudolf289
 
Hi Rudolf289,

In relation to your comment on the "VAT at the point of entry" I would be grateful if you can give me some further information as to how I can act on your suggestion.

I was informed by an Importation Company some months back that they provide this facility but they were reluctant to give any further details. I checked with my shipping company and they said they never heard of this procedure.

I have searched for information on the web and did not find anything relevant.

Any further information would be very helpful.

Regards,
Alltheaces
 
Eliminating VAt at the point of entry

alltheaces said:
Hi Rudolf289,

In relation to your comment on the "VAT at the point of entry" I would be grateful if you can give me some further information as to how I can act on your suggestion.

I was informed by an Importation Company some months back that they provide this facility but they were reluctant to give any further details. I checked with my shipping company and they said they never heard of this procedure.

I have searched for information on the web and did not find anything relevant.

Any further information would be very helpful.

Regards,
Alltheaces
Click to expand...

Hello Alltheaces,

Oke, I normally send a document that describes in detail how the process works. A shipping company would not get involved in this process. Partly because they lack the knowledge and partly because their primary function is to ship containers and do not see any added value in providing these type of services.

The company that approached you offering these type of services may have some summary knowledge of the process but may not be fully familiar and may have difficulty explaining the concept to the extend that they can show with the VAT and Intrastat returns to hand how to properly account for these transactions.

This is the full text of the document, minus the references to my company.

VAT ON INTRA COMMUNITY TRADE


As a general rule, goods supplied by a registered trader (party A) in an EU member state to a registered trader (party B) in another EU member state are a zero (VAT) rated supply. The supply by party A is an Intra-Community supply. The corresponding acquisition by party B is an Intra-Community acquisition. The invoice issued by party A must show the VAT registration details of both party A and party B.

Party A is obliged to file a quarterly V.I.E.S return in which he shows the VAT details of party B and details of the Intra-Community supply to party B. In addition party A files an Intrastat return in which he accounts for the Intra-Community supply.

Party B accounts for the VAT due on the Intra-Community acquisition at the rate applicable in his VAT jurisdiction, in his periodic VAT return. If party B is entitled to claim full deductibility on his VAT inputs, he can deduct the VAT due in the same return. There is no requirement to file a V.I.E.S. return by party B, however, there is a requirement to file an Intrastat return to account for the Intra-Community acquisition.

The process to account for VAT on Intra-Community trade is called postponed accounting.

VAT ON IMPORTS FROM OUTSIDE THE EU

As a general rule, VAT on imports from outside the EU is payable on entry of the goods to customs. VAT paid by registered traders on imports is usually a deductable “input” and therefore can be re-claimed in the periodic VAT return.

The exception to this rule is the Netherlands where registered traders account for VAT on the basis of postponed accounting regardless of the origin of the goods.

FISCAL REPRESENTATION

The VAT authorities in the Netherlands, Belgium, Germany and France allow the use of Tax Representatives (or Fiscal Representatives).

The following is an outline of the process whereby the goods are cleared into the EU in the Netherlands or Belgium, for immediate onward delivery to the consignee in Ireland (A similar process applies in Germany and the UK but most seafreight container traffic from outside the EU tranships at Rotterdam or Antwerp);
q The Irish client issues an Authorisation to a Customs Broker at the point of transhipment, to act as their Fiscal Representative.
q The Fiscal Representative clears the goods upon arrival in Rotterdam or Antwerp into the EU. The Fiscal Representative pays the duty (if applicable) and accounts for the VAT (using his VAT registration number) on his VAT return on the basis of postponed accounting. No VAT is paid at the point of transhipment.
q The goods are immediately onforwarded to the consignee in Ireland and treated from a VAT point of view as an Intra-Community Supply. The Fiscal Representative files a V.I.E.S. return and an INTRASTAT return with the appropriate authorities in the country of transhipment (e.g. Netherlands or Belgium), showing the details of the transaction and VAT registration of the consignee in Ireland.
q The net effect of importing the goods into the EU and immediately on- forwarding the same goods to the consignee in another EU member state is a zero outlay in VAT in the importing country (e.g. The Netherlands or Belgium). The VAT liability that is incurred on importation is cancelled out by the immediate on-forwarding (Intra Community Supply) to the consignee in Ireland.
q The consignee in Ireland incurs a VAT liability as normal on an Intra Community Acquisition. The consignee is required to account for the VAT at the appropriate Irish VAT rate in his VAT return. Where the consignee is entitled to full deductibility, a simultaneous input credit may be taken thus cancelling the liability.
q In addition the Irish consignee is required to include the transaction in his INTRASTAT return. This is applicable if the Irish Consignee imports in excess of € 191.000 per annum.
q The bottomline is that this process eliminates the need to pay VAT at the point of entry in Ireland.

I trust this explains how the process works. It is not a secret, it is common practise and more and more importers in Ireland are beginning to avail of this process, especially now that cash flow is a major challenge for SME's.

Feel free to send me a PM or post again if you have any questions in relation to this process or if I can assist you in any other way.

Cheers,
Rudolf289


 
Eliminating VAt at the point of entry

Apologies, previous post was not quite complete. Please note that goods transhipping via the UK en-route to Ireland can avail of this process aswell.

This process is better geared towards full container loads. It does not work for Groupage / Less than Container Load (LCL) shipments unless they are phisically discharged at the UK/European point of transhipment.

One of the most often asked question is : "Is this legal?". You don't have to take my word for it. I can show you the relevant sections on the VAT Guides in Ireland and the UK where the process is spelled out by the VAT authorities.

Cheers,
Rudolf289
 
My apologies for not answering and thanking those who took the time to reply sooner, I actually forgot I had posted this thread.
I will pick up on it again soon and thanks Rudolf I will be in touch.
 
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