Freya Jane
When importing items outside the European Union, you must pass through the customs import duties and taxes. However, entering this exciting world involves encountering a number of unforeseen issues, particularly regarding customs charges.
A vital electronic document, an import customs declaration, provides comprehensive information regarding the import, including your details, those of the exporter, product specifications, value, and country of origin. By ensuring the accuracy of this declaration and having prior knowledge of applicable duty rates, you can prevent any mishaps.
According to the World Trade Organisation, “The global trade has increased to $25.3 trillion in 2022.” Given this increasing number, it’s clear that comprehending the financial importance of importing goods is crucial. This exponential rise highlights how imports are becoming more and more significant in today’s trade environment. In the contemporary interconnected global economy, success relies on the capacity to comprehend the financial ramifications of importing goods.
This blog post delves into the importance of customs duties and taxes and everything you must know.
A fee imposed by a government on products entering a country is known as a customs duty, often referred to as an import duty or tariff.
The customs duties have two main goals:
Protecting local industries: Placing tax or duty on imported goods encourages local job development and manufacturing, which will reduce their competitiveness when compared to domestically produced alternatives.
Government revenue: Customs charges provide governments with a considerable amount of revenue that goes towards funding national budgets.
HMRC primarily implements two types of taxes and duties on imported goods.
Customs duties are applied to imported goods by HMRC that are valued at more than 135 GBP. These import duties normally range from 0% to 25% of the value of the goods; which are not applied to gifts.
If the gifts are priced between 135-630 GBP, they are subject to a custom import rate of 2.5% or less, while gifts over GBP 630 will be subject to higher rates based on their individual commodity codes.
Generally, imported goods are subjected to 20% of the VAT rate. Nonetheless, a few items, such as child car seats, health products, and fuel heating, incur to 5% VAT rate.
It is crucial to remember that even though most books, food, and children’s clothes are VAT-exempt, the sale of these items needs to be reported on your VAT return. Furthermore, gifts worth less than GBP 39 are VAT-free.
Calculating customs taxes and duties is a major challenge faced by UK importers. As per Statista survey, “30.3% importing businesses had to deal with customs duties and taxes problems at the UK borders”.
To keep you free from this hassle, iCustoms has come up with its automated tool, i.e. iCalculator; it helps with tax calculations within a matter of minutes.
Furthermore, we will also equip you with the manual calculation of the customs duties and VAT by considering the following example:
Customs duties can be calculated by two methods:
After calculating the value of your goods either by FOB or CIF, multiply it by the VAT rate designated by the UK government on the tariff trade site.
Resuming the same example, the calculation is carried out as follows:
CIF
GBP 10,500 x 20%= 2,100 GBP
FOB
GBP 10,000 x 20 %= 2,080 GBP
A number of costs related to customs clearance must be taken into account when importing products. Among them exist:
Customs import rate: The specific rate for a given commodity depends on the product category and the country of origin. Prior research on duty rates is necessary for an accurate estimate of costs.
It is essential to do an extensive study on customs import regulations (also known as import restrictions) prior to importing any items. This study ought to include:
Comprehending regulations: Become acquainted with the particular import laws governing the products you plan to import. These rules could cover things like licence requirements, restricted products, and standards for product safety.
Gaining knowledge of customs duties, import taxes, and the import clearance procedure will enable you to facilitate the entry of goods into a country in a streamlined and economical manner. When creating import strategies, it is imperative to conduct comprehensive regulatory research, ensure the preparation of precise documentation, and account for all possible expenses.
For additional information regarding import duties and taxes, refer to authoritative resources furnished by your country’s customs authority, such as iCustoms. Our sophisticated AI-driven iCalculator automates the calculation of customs taxes and duties, saving you time and avoiding extra costs.
