VAT at point of Entry, to record it correctly requires that you setup VAT codes in your accounts system/bookkeeping software that are separate to postponed accounting for VAT, EU, and Domestic Purchases.
The main reason for these VAT codes is to allow you to be able to enter all the related transaction values on your VAT3 and VAT RTD forms for the Revenue Commissioners.
Under Irish VAT law you are required that purchase invoices be analysed as resale or non-resale transactions. Therefore, you need at least 6 VAT codes. (see note 1 below)
|VAT at Point of Entry imports|
|Resale VAT codes||Non-Resale VAT codes|
|POE01R @ 0%|
POE02R @ 13.5%
POE03R @ 23%
|POE01N @ 0%|
POE02N @ 13.5%
POE03N @ 23%
You must use the VAT code rate applicable had the goods been bought in Ireland.
Your accounts system will calculate on each net amount a VAT value of Zero on each transaction
e.g. Net at 23% = Zero value (23% is indicating the VAT rate that would have been used if the goods were bought from an Irish supplier)
You need to be registered for VAT and have an EORI number.
Duty (it is not VAT)
Duty must be setup as a General Ledger code, it is a cost to the business, it is not reclaimable.
If there is no duty payable on the import, then the duty amount is zero
VAT at Point of Entry Example:
Invoice- Chinese Supplier
Goods – Net $20,000
Customs & Excise Exchange Rate used 1.155 (see note 3 below)
Chinese Supplier cost in EURO
Goods Net €17,316.02 ($20,000 @ 1.155)
Invoice- Freight Company
Service: Freight China to EU Port – Net €4,000
(Freight from EU port to your warehouse is not counted in the calculation of Duty)
Invoice- Customs and Excise (see note 2 below)
Total charge for Duty calculation €21,316.02 (€17,316.02 + €4,000)
VAT at 23% €5,147.82 (€22,381.82 x 23%)
Supplier Invoice Transactions Net and its VAT code analysis
Invoice 1. China Supplier Invoice
Vat Code: POE03R
Invoice 2. Freight Supplier Invoice
VAT code: POE03R
Invoice 3. Customs & Excise as a Supplier (Total €6,213.62)
Net: Duty Cost €1,065.80
VAT code: POE03R
Vat: VAT at Point on Entry €5,147.82
VAT code: POE03R
Supplier Invoice bookkeeping entry
|Line||GL Code||Net||Vat Code||VAT Amount||Total|
|2||Vat at POE||0.00||POE03R||5147.82||5147.82|
Information for VAT 3 Return and RTD (Return of Trading Details)
BOX T2 VAT on Purchases
The VAT paid at point of entry is added to the other values here (VAT on Domestic Purchases and Postponed Accounting)
In this example €5147.82 is our VAT at point of entry amount
(Duty must not be to claimed back. Only VAT can be claimed back)
Value of Stock for Resale (purchases, Intra-EU acquisitions, Postponed Accounting & imports)
Each transaction increases the value to be placed in BOX R1
- Supplier Invoice China €17,316.02 (Goods) (See Note 4)
- Supplier Invoice Shipper €4,000.00 (Shipping cost To Port)
- Supplier Invoice Duty €1,065.80
The three Supplier Invoices make up the total cost of importing the goods into the EU.
VAT 3 Boxes
|VAT at Point of Entry||€5,147.82||T2|
RTD Boxes (All Net of VAT values and in Euro)
|Supplier Invoice Net Value||€17,316.02||R1|
|Freight to EU Port||€4,000.00||R1|
Your software may have other features that allow you to analyse transactions as Resale and Non resale purchases or how to transact VAT at point of entry. We are going with the simplest method here.
If you do not import goods at 0% or 13.5% then you may not need to setup those VAT rates. But it is good housekeeping to setup all possible VAT codes for consistency and accuracy.
The Customs and Excise section of the Revenue Commissioners will issue you with an invoice for the VAT and Duty amount, make sure you get it. Or your customs clearance agent may issue you with an invoice and then pay the duty charge on your behalf.
You can also see these invoices using the Revenue On-Line Service (ROS)
ROS screen shot, how to see Duty and VAT as recorded by the Customs and Excise section
How is the Duty amount and the VAT calculated?
Customs and Excise consider the total cost of getting the goods from China, UK, or other Non-EU Countries to a Port in the EU (usually Rotterdam for Chinese imports and Dublin Port for UK imports). This includes all freight cost to get the costs from the Supplier to the EU. It does not include the cost of freight from an EU port to your warehouse or premises.
That cost of the supplier’s invoice and the freight costs together is what the duty is calculated on.
The VAT is then calculated based on the Product Supplier’s Invoice value, the Freight Suppliers invoice and the Duty
Value for Duty calculation Suppliers Invoice + Freight Invoice
Value for VAT Calculation Suppliers Invoice + Freight Invoice + Duty Amount
All values must first be converted to EURO, if in another currency, using the exchange rate as set by Customs and Excise section at the beginning of each calendar month. For customs clearance no other exchange rate can be used. Not your accounts system rate, the rate at which you paid for the goods or any other rate you can think of.
Exchange Rate Issues
Invoice 1. The VAT calculated on $20,000 is $2300 (20,000 @ 23%)
This is a USD (US Dollars) amount
This needs to be in EURO
An issue arises where the Customs and Excise uses a rate of 1.155 and your accounts system uses a rate of 1.170. So, you end up with two different values
$20,000 @ 1.155 = €17,316.02
$20,000 @ 1.170 = €17,094.02
There is a difference of €222.00
You should talk with your accounts software support department and ask them how this can be dealt with. Your VAT at point of Entry calculated by your accounts system may not match the Customs and Excise Values. This is really an administrative issue and generally is not seen as an issue.