February 11, 2022
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Import procedure 42: VAT-exempt supply in EU

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What is customs procedure 42?

Customs procedure 42 is a mechanism that an EU importer can use to obtain a VAT exemption. It is applied when goods imported from outside the EU into a Member State will be transported to another EU Member State. In such cases, the VAT is due in the latter - the Member State of destination.

The customs procedure 42 consists of two parts:

  • the importation of the goods from a non-EU State to a Member State 1, which is VAT exempt; and 
  • the subsequent intra-Community supply of the goods from Member State 1 to Member State 2, which is taxed at a 0% VAT rate.

Consequently, the import of goods to Member State 1 (country of import) is VAT neutral.

What are the conditions?

To apply for VAT exemption under customs procedure 42 the importer has to provide the competent authorities of Member State 1 with at least the following information:

  • their VAT identification number issued in the Member State 1 or the VAT identification number of their tax representative (fiscal agent), liable for payment of the VAT, issued in the Member State 1;
  • the VAT identification number of the customer (to whom the goods are supplied), issued in Member State2, or their own VAT identification number issued in the Member State 2;
  • the evidence that the imported goods are intended to be transported or dispatched from Member State 1 to Member State 2.

What are the advantages of customs procedure 42?

Under customs procedure 42, VAT obligation does not arise at the time of importing into the EU. Instead, VAT is accounted for by the purchaser in Member State 2 under the national VAT rules. That improves the importer’s cash flow.

What is the legal title for ‘customs procedure 42’?

‘Customs procedure 42’ title comes in colloquial speech from the first digits of the code to be entered in the customs declaration. The legal title is ‘Simultaneous release for free circulation and home use of goods which are the subject of a VAT-exempt supply to another Member State and, when applicable, an excise duty suspension’.

What is the legal background for applying customs procedure 42?

Such a supply might be VAT exempted under certain conditions, which are regulated by the EU VAT Directive (Council Directive 2006/112/EC of 28 November 2006 on the common system of value added tax), national law and extensive court practice.

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For more information see video course Exemption from import VAT under the 'Customs Procedure 42'

Comments ()

en
Keep an eye on customs case law or Who has enough money to throw away?
03-04-2022

‘Compliance’ with statute law has given rise to a lot of publications and debates. However, when considering compliance, it should not be forgotten that case law also influences a company’s organisation and processes. Can you think of any court cases which are having an effect on your internal operations? Using the current proceedings on ‘reimbursement interest’ as an example, this contribution shows that court rulings can influence customs practice in companies and so it is important that you follow court proceedings from the outset. This is because even pending proceedings may enable you to earn money with customs or at least avoid throwing it away. Court judgements do not always operate to the detriment of the economic participant.

Dr. Talke Ovie

taxes
en
Keep an eye on customs case law or Who has enough money to throw away?
03-04-2022

‘Compliance’ with statute law has given rise to a lot of publications and debates. However, when considering compliance, it should not be forgotten that case law also influences a company’s organisation and processes. Can you think of any court cases which are having an effect on your internal operations? Using the current proceedings on ‘reimbursement interest’ as an example, this contribution shows that court rulings can influence customs practice in companies and so it is important that you follow court proceedings from the outset. This is because even pending proceedings may enable you to earn money with customs or at least avoid throwing it away. Court judgements do not always operate to the detriment of the economic participant.

Dr. Talke Ovie

taxes
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Customs duties (tariffs)
30-01-2022

Customs duty is a tax imposed on goods upon their entry (import) or exit (export) from the customs territory. There are several types of customs duties.

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Point of view on these aspects of trade, customs and career: Don’t just trade, provide global service. As a trader, respond positively to the role Customs plays within global trade. Six points to consider when planning your career as a customs advisor.

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Point of view on some aspects of trade, customs and career
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Point of view on these aspects of trade, customs and career: Don’t just trade, provide global service. As a trader, respond positively to the role Customs plays within global trade. Six points to consider when planning your career as a customs advisor.

Ronnie Van Rooyen

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Do we have time to prepare for the introduction of trade defence measures?
31-12-2021

Importers, especially small and medium-sized enterprises, are often unaware of trade defence instruments (TDIs) and face the consequences of newly introduced measures unprepared, thus incurring unforeseen costs. Is it possible to prepare for this and thus, albeit partially, manage the risks associated with the introduction of TDIs? One mean to manage such risks would be regular monitoring of the regulatory environment. Of course, this requires resources, but it is equally important to know the process and deadlines for setting the TDI, as well as why different sizes of measures apply to the same product imported from the same non-EU country and where to find the necessary information. Thus, this is to be discussed in the article.

Jovita Dobrovalskienė

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en, lt
Do we have time to prepare for the introduction of trade defence measures?
31-12-2021

Importers, especially small and medium-sized enterprises, are often unaware of trade defence instruments (TDIs) and face the consequences of newly introduced measures unprepared, thus incurring unforeseen costs. Is it possible to prepare for this and thus, albeit partially, manage the risks associated with the introduction of TDIs? One mean to manage such risks would be regular monitoring of the regulatory environment. Of course, this requires resources, but it is equally important to know the process and deadlines for setting the TDI, as well as why different sizes of measures apply to the same product imported from the same non-EU country and where to find the necessary information. Thus, this is to be discussed in the article.

Jovita Dobrovalskienė

taxes
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