A fiscal representative is a company that a business appoints to pay the import VAT and duty on behalf of the customer. You may need to appoint one if you are exporting or if you are responsible for paying import taxes.
Where VAT and duty taxes are paid and who will be responsible for them will depend on the direction of the goods and the incoterm used. For exports from the UK to Europe the taxes need to be paid in the EU and for Europe to UK imports, payable in the UK.
When using the incoterms Free Carrier (FCA) or Delivered at Place (DAP) the taxes are usually paid by the importer in the shipment’s destination country.
However, if the exporter decides to handle the whole door-to-door process themselves, using the Incoterm Delivered Duty Paid (DDP) then this will include paying the taxes in the importing country.
This makes your customers’ lives a bit easier as they do not need to administrate paying tax themselves and this will make those products more attractive to potential customers.
General or limited fiscal representation
The main difference between General Fiscal Representation (GFR) and Limited Fiscal Representation (LFR) is that under GFR the representative will handle all tax matters, local taxes, duties and VAT. Under limited fiscal representation, the representative focuses only on VAT obligations.
With General Fiscal Representation the foreign companies will need to be VAT registered in the country they intend to sell their goods in.
Limited Fiscal Representation can be used to bring goods into one EU member state and sell them in another without paying VAT at the time of import. For example, this is relevant if the goods were being exported from the UK, imported to the Netherlands as that is closest country and then being transported to Italy as a final destination.
Limited Fiscal Representation is available at ports in the UK, Netherlands, France and Belgium. In the Netherlands, LFR would be under Article 23 and could either be a general or limited fiscal representation. In a French port it would be under Regime 40 or 42.
What is fiscal representation?
A fiscal representative would need to be appointed in the shipment’s destination customs territory. For example, sending a shipment to Italy would require a fiscal representative based in the European Union.
This list shows EU countries where a UK business would be required to appoint a fiscal representative, registered with the relevant tax authorities:
- Austria
- Belgium
- Bulgaria
- Croatia
- Cyprus
- Denmark
- Finland
- France
- Hungary
- Italy
- Lithuania
- Netherlands
- Poland
- Portugal
- Romania
- Slovenia
- Spain
- Sweden
Each European country has different approaches to Fiscal Representation. Here at Baxter Freight, our experts can help you arrange fiscal representation for your European shipments and explain exactly what you need to do.
Setting up limited fiscal representation in the UK
Non-UK companies should approach a Customs Specialist/Broker such as Gerlach to set up Fiscal Representation assists throughout the process. This would allow them to deliver their goods under the Delivered Duty Paid incoterm.
The company could register themselves for fiscal representation in the UK if importing VAT applicable goods and administer paying UK VAT, but they would need to maintain records for:
- UK VAT Registration
- Everything bought and sold in the UK.
- VAT payment tracking for the reporting period.
Plus submit these records to HMRC and ensure payment before due dates.
However, in practice, a significant number of EU businesses will opt to not pay VAT and duty in the UK and instead pass that responsibility on to the UK buyer.
This would be transported under different incoterms such as Free Carrier (FCA), Ex works (EXW) or Delivered at Place (DAP). Your logistics partner will be best placed to offer options in this case.
If you work for a business which wishes to import to or export from the UK, then please talk with one of our experienced Customs Specialists about selecting the best option for you around Fiscal Representation.
