Anyone who releases goods from a third country for free circulation in the EU owes import VAT in addition to customs duty. For companies entitled to full input tax deduction, it is usually economically neutral. It is paid to customs and recovered from the tax office (Finanzamt) as input tax. This neutrality, however, requires that the right person makes the declaration, the right person deducts, and the taxable amount is correct.
Chargeable event and competence
Import VAT is a value added tax, but it is administered by customs. Under Section 21(2) of the VAT Act (UStG), the customs provisions apply to it mutatis mutandis. It therefore generally arises together with the customs debt, i.e. on release of the goods for free circulation, even where no customs duty is payable, for example because of preferential origin. The debtor is the declarant and, in the case of indirect representation, also the person on whose behalf the declaration is made.
Taxable amount
Under Section 11 UStG, import VAT is based on the customs value. Under subsection (3), the following must be added, among other things:
- Charges abroad: import duties, taxes and other charges owed abroad for the goods,
- Charges on importation: the customs duty itself and excise duties that have definitively arisen when the import VAT arises,
- Commission and transport costs: costs up to the first place of destination within the Community territory and, if a further place of destination within the Community territory is already known when the tax arises, up to that place.
Every error in the customs value therefore has a knock-on effect on import VAT. If, for example, royalties or assists are overlooked, the taxable amount is too low. Details are in the article Customs value: royalties and assists.
Input tax deduction: who may deduct?
Under Section 15(1) sentence 1 no. 2 UStG, only the trader for whose business the goods were imported may deduct. According to the tax authorities, the decisive factor is who has the power of disposal over the goods at the time of release. Who submits the customs declaration or pays the tax is irrelevant in this respect. Since 2020, the import VAT that has arisen is deductible, not only the import VAT paid. The deduction therefore does not require payment. Evidence is provided by the customs import duty assessment notice from ATLAS. It must show the person deducting and should be reconciled with the accounts.
Two constellations repeatedly cause problems:
- DDP delivery terms: if a foreign supplier delivers duty paid, it or its agent declares the goods and owes the import VAT. Its supply is then deemed to take place in Germany under Section 3(8) UStG. It must register in Germany and charge German VAT. The customer may not deduct the import VAT, even if its name appears on the assessment notice or the import VAT is recharged to it.
- Forwarder as indirect representative: the forwarder is jointly and severally liable, but has no power of disposal and therefore no input tax deduction. If the principal defaults or was merely a front, the forwarder is left with the tax.
Deferment account and the time-limit model
With a deferment account with customs, import VAT does not fall due immediately but in aggregate. Since December 2020, the so-called time-limit model (Fristenmodell) under Section 21(3a) UStG has applied. Deferred import VAT is only payable on the 26th of the second following month. Combined with the deduction of the tax that has arisen, the input tax deduction can often be claimed before payment where VAT returns are filed monthly. A guarantee is required. Anyone using their forwarder’s deferment account should check the invoicing carefully.
A genuine offsetting model, under which import VAT is no longer paid to customs at all but declared in the VAT return and simultaneously deducted as input tax, does not yet exist in Germany. On 10 September 2026, the Conference of Finance Ministers of the Länder (Finanzministerkonferenz) decided to introduce such a model from 1 January 2030. Legislation is still pending.
Procedure 4200 and fraud risks
If goods are imported and immediately supplied on to another Member State, the importation can be exempt from VAT under Section 5(1) no. 3 UStG, declared in the customs declaration with procedure code 4200. Requirements include valid VAT identification numbers of the importer and the acquirer, proof of transport to the other Member State and a correct recapitulative statement (Zusammenfassende Meldung). Similar questions arise with VAT warehouses under Section 4 no. 4a UStG.
The procedure is susceptible to fraud. The goods never arrive in the other Member State, and the acquirer cannot be traced. According to the case law of the Court of Justice of the European Union, the exemption is lost if the declarant was involved in fraud or did not exercise the care that could be expected of it. Customs then recovers the import VAT, often from the forwarder who made the declaration as indirect representative. Anyone handling 4200 consignments should check principals and acquirers and keep complete records of the evidence.
Consequences of errors
- Post-clearance recovery: customs assesses import VAT that was levied too low. The time limit is generally three years, five years in the case of reckless underpayment and ten years in the case of evasion.
- Reclaim of input tax: if the wrong person has deducted, the tax office reclaims the input tax, with interest.
- Criminal liability: import VAT is an import duty. Anyone who underpays it may be liable to prosecution under Section 370 of the Fiscal Code (Abgabenordnung, AO), even if they would have been entitled to deduct it as input tax. Since the decision of the Federal Court of Justice (Bundesgerichtshof) of 13 September 2018, case no. 1 StR 642/17, an input tax deduction does, however, reduce the amount evaded if it is directly economically connected with the evaded transaction and the requirements of Section 15 UStG are met. This affects the thresholds for an especially serious case, the limitation period and voluntary self-disclosure. No one can rely on this; the connection must be demonstrated in the individual case.
How to proceed
- Check delivery terms. For DDP deliveries, clarify who is the declarant, and do not deduct someone else’s import VAT.
- Agree on representation. Agree in writing with your forwarder whether it acts as direct or indirect representative and whose deferment account is used.
- Reconcile assessment notices. Regularly reconcile the import duty assessment notices with the input tax amounts booked.
- Determine the customs value properly. Additions and transport costs affect both charges.
- Correct errors early. Particularly where intent may be involved, timely correction is important. Advice on the individual case is useful here, for example as part of our tax advice.