You may have experienced this before, you ordered a package from a Chinese e-shop, but instead you received a text message from the Czech Post asking you to fill in the details of your shipment for customs clearance. What to do now?
What is customs duty and when is it payable
Customs duty or customs fee is a levy levied by the state when goods cross the customs border. It is a protective measure to protect the local market from imported goods from foreign countries. But it is also used as a form of political struggle and a way to raise money. The collection and administration of customs duties is the responsibility of the Customs Administration and is regulated by the Customs Act.
As the countries of the European Union share a common customs border, there is free trade and they are not subject to customs duties. However, if you want to buy goods from outside the EU, you may already be subject to customs.
What is VAT and when is it payable
VAT is an abbreviation for value added tax. It is a form of indirect tax that is paid on the purchase of goods and services and constitutes one of the main revenues of the state budget. You pay VAT almost every time you buy an item or pay for a service. There are three types of rates – the basic 21%, and the reduced rate, which is divided into 15% and 10%.
Tip: The distribution of VAT rates is to change from 2024, when there will be only two types of rates – the basic 21% and the reduced 12%.
For goods and services purchased in the Czech Republic, VAT is included in the price, but the problem arises when purchasing goods from countries outside the European Union, where of course VAT is not included, as each country has different tax settings. Until recently, VAT did not apply to shipments up to €22. However, this is no longer the case and now applies to almost all goods imported from outside the EU.
Tax and VAT on goods from China
Buying cheap goods from Asian e-shops, especially from China, is becoming increasingly popular among people. Ebay, Wish or Aliexpress specifically are among the most popular portals to buy such goods. Up until 2021, this purchase was very simple, because such small shipments up to the value of EUR 22 were not subject to customs duty or VAT.
However, the VAT and customs duties on these shipments added up to a large sum, which the Member States of the European Union were losing, and the EU has therefore decided to change this situation. So from 2021 onwards, there is an obligation to pay VAT on all purchases of goods outside the EU at national level within the EU. For shipments over €22 you are then obliged to submit a total declaration and for shipments over €150 you are also obliged to pay customs duty. These rules apply not only to Chinese e-shops, but also to goods from the US or other non-EU countries.
Are you getting lost in VAT and customs duties on goods from abroad or do you have a problem you don’t know how to deal with? Don’t worry, get advice from a lawyer. We can assess your specific situation and help you to resolve it.
How to pay VAT on goods from China
As mentioned above, VAT always applies to goods ordered outside the European Union and you will not have to pay it (except for goods marked as a gift that are under €45). There are several ways to pay VAT.
Chinese e-shops most often have VAT dealt with through the so-called single point of entry scheme. This works in such a way that these e-shops pay VAT in aggregate for all the goods they sell to the EU. VAT is therefore already part of the price of the goods you buy and you therefore have nothing to worry about.
Hint: You can recognize goods with VAT already included in the price by the “VAT included” marking below the price of the goods.
Another option often used by these e-shops is to set up warehouses directly in the EU from where they ship goods to buyers in the area. In this case, the VAT is also included directly in the price of the goods you order, so you don’t have to worry about it anymore.
If you are ordering from somewhere where VAT is not included in the price of the goods, then you have no choice but to pay the VAT yourself. In this case, you must pay the VAT to the Customs Administration. The latter offers its own application for this purpose eCeP, where you file your customs declaration and pay the VAT straight away (discussed in more detail below). This option is available to you when you have your package sent by Czech Post, which is the standard carrier for shipments from abroad.
There is another option, but it is quite expensive, which is to use a retained company to represent you in the customs procedure and handle the DPH for you. This is usually the Czech Post or another transport company.
How to pay customs duty on goods from China
Duty on goods from China is payable if the goods exceed 150 euros excluding shipping costs. However, a customs declaration is already required if the goods are worth more than €22 or if you have to pay VAT.
It is common practice with large Chinese e-shops that the goods you order travel from China first to their warehouses in the European Union, where the goods are cleared and then shipped to you. In this case, you do not have to do anything. However, if the goods have come directly from China and are worth more than €22, then you have to file the customs declaration directly or, as mentioned in the VAT section, you have to authorise the transport company to handle the customs procedure for you.
If you want to file the customs declaration yourself, then again the Customs Administration eCeP app comes into play. However, this option is only available for shipments up to 150 euros. The Customs Administration has prepared detailed instructions on how to file a customs declaration on their Customs Portal. But still, let’s list the basic steps for filing a customs declaration in the eCeP app:
- To log in to the eCeP app, you need to have a form of identification, such as a data box.
- You then select the type of shipment and verify the existence of the shipment with the Czech Post or another carrier by entering the shipment number.
- You then enter basic information about the shipment, including the additional tax identification number (IOSS), the declarant (this is who files the customs declaration – so probably you), the importer (who has the shipment shipped – again probably you) and the consignor.
- Finally, you fill in the information about the contents of the shipment and submit the form.
Tip: It’s worth using a data box to identify yourself when filling in your customs declaration. Read our article to find out how to easily set one up.
For shipments with a value of more than €150, the eCeP application cannot be used, but a standard customs procedure must be followed. This is not something you can do on your own and it is definitely worth it to strengthen your shipping company in this case, even at the cost of paying extra.
How to do it
Up to EUR 22
If VAT is included in the price, you do not file a customs declaration
If VAT is not included in the price of the goods, then you must file a customs declaration via eCeP or authorize the transport company
Above €22 but up to €150
You don't pay customs duty, but you file a customs declaration
You must file a customs declaration via the eCeP app or authorize the transport company
Over 150 euros
You declare and pay customs duty
You have to authorise the transport company
Aliexpress – duty and VAT
As already mentioned, with Aliexpress you don’t have to deal with VAT because it is already included in the price and Aliexpress will handle that part for you. Similarly, it’s also possible to avoid having to file customs declarations – just choose the “Aliexpress Standard Shipping” shipping mode, where it goes from gosh first to a warehouse in Belgium and the customs is sorted out there.