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, lt
Anti-dumping duties
02-10-2022

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taxes
en, lt
Anti-dumping duties
02-10-2022

Anti-dumping measures may be applied against imports of a product at an export price below its ‘normal value’ (usually the price of the product in the domestic market of the exporting country) if such dumped imports cause injury to a domestic industry.

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image en, lt
Anti-dumping: the 'lesser duty' pitfalls
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CustomsClear ㅤ

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image en, lt
Anti-dumping: the 'lesser duty' pitfalls
02-10-2022

CustomsClear ㅤ

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en, lt
Extinction of customs debt - does it include VAT and excise?
25-09-2022

Knowing how provisions of one or another customs and tax legislation are applied, protects business from financial and time losses intended for the resolution of disputes in courts. In this review of the judgement of the Court of Justice of the European Union, we draw attention to the aspects related to excise duty and VAT debt for goods illegally imported into the EU from the third countries - whether it is extinguished together with the import duty debt.

Jovita Dobrovalskienė

import, taxes
en, lt
Extinction of customs debt - does it include VAT and excise?
25-09-2022

Knowing how provisions of one or another customs and tax legislation are applied, protects business from financial and time losses intended for the resolution of disputes in courts. In this review of the judgement of the Court of Justice of the European Union, we draw attention to the aspects related to excise duty and VAT debt for goods illegally imported into the EU from the third countries - whether it is extinguished together with the import duty debt.

Jovita Dobrovalskienė

import, taxes
en, lt
Alcohol turned into water in a customs warehouse: who pays the customs bill?
28-08-2022

A customs warehouse stored bottled alcohol (vodka). Customs audited the warehouse, took a sample, and found that there was water instead of vodka in the bottles! Customs ordered the warehouse to pay €308,455 customs debt (import duties and taxes, fines and interest). A dispute arose regarding who must pay the customs debt, as the customs warehouse is not obliged to take samples of the goods. Let's look at the clarification of the Supreme Administrative Court of Lithuania (SACL) in this case.

Jurgita Bartninkienė

taxes
en, lt
Alcohol turned into water in a customs warehouse: who pays the customs bill?
28-08-2022

A customs warehouse stored bottled alcohol (vodka). Customs audited the warehouse, took a sample, and found that there was water instead of vodka in the bottles! Customs ordered the warehouse to pay €308,455 customs debt (import duties and taxes, fines and interest). A dispute arose regarding who must pay the customs debt, as the customs warehouse is not obliged to take samples of the goods. Let's look at the clarification of the Supreme Administrative Court of Lithuania (SACL) in this case.

Jurgita Bartninkienė

taxes
lt
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17-07-2022

Pastarųjų metų teismų praktika mokestinių ginčų bylose su muitine patvirtina, jog įforminus prekių laikinąjį saugojimą ir priėmus prekes laikinai saugoti, neretai kyla klausimas, ar būtent laikinojo saugojimo sandėlio savininkas (turėtojas), o ne kiti asmenys, gali būti laikomas skolingu (bei kokiomis sąlygomis) muitinei už prekių trūkumą, kuris buvo nustatytas vėliau su saugotomis prekėmis įforminus bei įvykdžius kitas muitinės procedūras, kurias atliko ir vykdė kiti asmenys. Atsižvelgiant į tai, šiame straipsnyje aptariami ES ir nacionalinių teismų (Lietuvos Respublikoje) pateikti išaiškinimai, reikšmingi šios situacijos vertinimui bei aptariamos su laikinojo saugojimo metu padarytais galimais pažeidimais susijusios mokestinės teisinės pasekmės.

Dr. Gediminas Valantiejus

import
lt
Prekių laikinojo saugojimo pažeidimai ir jų teisinio vertinimo aktualijos (II dalis): pažeidimų mokestinės pasekmės
17-07-2022

Pastarųjų metų teismų praktika mokestinių ginčų bylose su muitine patvirtina, jog įforminus prekių laikinąjį saugojimą ir priėmus prekes laikinai saugoti, neretai kyla klausimas, ar būtent laikinojo saugojimo sandėlio savininkas (turėtojas), o ne kiti asmenys, gali būti laikomas skolingu (bei kokiomis sąlygomis) muitinei už prekių trūkumą, kuris buvo nustatytas vėliau su saugotomis prekėmis įforminus bei įvykdžius kitas muitinės procedūras, kurias atliko ir vykdė kiti asmenys. Atsižvelgiant į tai, šiame straipsnyje aptariami ES ir nacionalinių teismų (Lietuvos Respublikoje) pateikti išaiškinimai, reikšmingi šios situacijos vertinimui bei aptariamos su laikinojo saugojimo metu padarytais galimais pažeidimais susijusios mokestinės teisinės pasekmės.

Dr. Gediminas Valantiejus

import
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