As a US based company, we recently shipped a machine to our manufacturer in France for repair and return within 6 weeks in the United States. We have shipped with FedEx on DDP terms and it appears that customs duties and VAT have been charged by Customs upon arrival of the cargo in France.
Our supplier in France (the consignee) refused to pay those taxes because they are not the actual owner of the goods and we have been invoiced by FedEx. Please, advise if French import VAT is applicable on non-commercial temporary shipments? If yes, is there any chance for us to recover the amount of VAT charged by the French Customs?
Above is an example of inquiry received from a non-EU company seeking to reclaim import VAT paid on goods returned to France for repair purposes.
In most cases, non-EU companies do not succeed in their attempt to reclaim import VAT paid when shipping their own goods into France. This failure is due, not to the fact that they are not eligible to reclaim import taxes paid in France, but mainly because some customs processes specific to DDP shipments have not been implemented properly. Considering this situation, we thought it would be a nice idea to write down a short and accurate tax briefing in order to guide overseas companies willing to successfully reclaim taxes paid when sending their own products in France.
The present guidance is applicable to those foreign companies shipping into France all kind of goods for reparation (including under a warranty repair agreement), improvement, transformation, assembly (of spare parts), examination, analysis and testing (especially in bioscience and pharmaceutical industry).
It is also applicable to businesses importing industrial goods to be presented to potential customers during international trade shows, fairs and exhibitions held in France.
If possible, we strongly recommend you to read our tips before you send out the first shipment. Most of mistakes disqualifying foreign companies for VAT reclaim in France can be minimized if a solution to recover tax is sought before the shipment occurs and not after (which is usually too late to amend common “mistakes” appearing on the customs documents).
1. Apply for an EORI number before the shipment
If your company does not yet have an EORI number in the EU, the very first step of the procedure is to register your company in EORI system. The fact is that your company incorporated outside the EU keeps the full ownership on the goods to be imported into France. Therefore you should be able to act as the importer of record in France.
We remind you that since July 2009, it is no longer possible for a company to import goods in the EU without being registered in EORI system.
2. Prepare your shipping documents correctly
Once your company is registered in EORI system, you can now prepare the shipping documents to be entrusted to the freight or courier company of your choice. Naturally, you will enter the name and address of your foreign company in the section “shipper”. The common “mistake” to avoid here is to enter the name of the French company (the party receiving the goods in France) in the section “consignee”. We have put the word “mistake” in quotes because in a normal business scenario, this way of doing is not normally a mistake. However, it is not the proper way to prepare the shipping details if you intend to reclaim import VAT paid in France.
Indeed, the customs brokers in France will usually indicate in the customs clearance document that the “consignee” is the “importer of record”. The tax law in France also states that only the importer of record has the right to reclaim VAT paid to the customs authorities. It is precisely for this last reason that you have to indicate in the section “consignee” the name of your overseas company, in c/o the name and address of the actual recipient in France and your EORI number.
Caution: If the company receiving non-commercial goods in France is mentioned as the “importer of record” on the customs clearance document, the overseas shipper loses its right to reclaim French VAT. In most cases, the company receiving the goods in France will refuse to pay import VAT because it is not the actual owner of the goods. The result of such a confusing situation is that neither the overseas company nor the consignee in France will be able to reclaim VAT incurred.
A last step in the preparation of your shipping details will be to indicate on the commercial invoice (only for customs purposes) the full and accurate value of the item(s) sent to France. Not indicating the correct value of your cargo may lead to a serious delay during the customs clearance process and the customs clearance might be even not authorized.
3. Request the customs clearance documents
After the customs clearance is completed, you will normally receive from your carrier a freight invoice showing duty and taxes paid in France on your behalf. You will also receive a copy of the French customs clearance document showing your company as “importer of record”. Keep the original copies of those documents carefully as they will be used for your VAT refund application.
4. Make sure you can justify the reason of your shipment
You should be able to justify the reason of your shipment to France.
For example, if you have returned goods to France for repair purposes (including under a warranty repair agreement), you will need to keep in your records some commercial evidences like a copy of the warranty repair agreement, an invoice from the French service provider (if the repair is not under warranty) and customs document of exit showing that the goods once repaired have been re-exported to your country.
5. Get in touch with an authorized fiscal representative
In France, as a non-EU company, you can reclaim VAT only by appointing an authorized fiscal representative. Corintax® is an authorized fiscal representative well known by the tax office in charge of VAT refund claims. Our commitment for successful results compels us to serve our clients with talent and competence.
You may want to read more on tax reclaim process in France, we invite you to have a look on this article: Claiming back French VAT on business expenses.
If you need a specific assistance, feel free to send your enquiry to vat@N0SPAM.corintax.com and a qualified tax advisor will get in touch with you.