VAT deduction for sea containers
VAT deduction for sea containers is a key tool for ensuring tax neutrality when importing goods into the Czech Republic from countries outside the European Union. This process allows VAT payers in the Czech Republic to claim back the value‑added tax (VAT) they paid when releasing the goods into the free‑circulation customs regime. In practice, VAT does not burden the business entity but only the final consumer in the chain.
How it works and legal framework
- Legislation: The VAT deduction on import is regulated primarily by Act No. 235/2004 Coll., on value‑added tax (the “VAT Act”), as well as related EU regulations (Directive 2006/112/EC) and the customs code.
- Customs procedure: When importing goods from third countries (outside the EU) the goods must be cleared and VAT paid. This VAT is subsequently claimable in the tax return.
- Economic neutrality: For companies, import VAT is cost‑neutral if the goods are used for economic activity with a right to deduction.
Difference between VAT and customs duty
- VAT is refundable when conditions are met; customs duty is non‑refundable and represents a real cost to the importer.
- VAT calculation is based on a base that includes the value of the goods, transport, insurance and assessed customs duty.
Detailed definition and operating principles
Who is entitled to the deduction?
The right to deduct import VAT is granted only to a VAT payer who:
- is registered for VAT in the Czech Republic,
- uses the imported goods for his economic activity,
- provides proper tax documents (especially the Unified Administrative Document – JSD).
Identified person vs. VAT payer
- Identified persons (e.g., non‑payers who acquire goods from the EU) have no right to deduct import VAT.
- VAT payer must pay VAT and can also claim it back if the goods are used for a taxable supply with a right to deduction.
Step‑by‑step process for applying the VAT deduction
| Step | Description | Key points/documents |
|---|---|---|
| 1. | Import of goods and customs procedure | Goods arrive at a port (e.g., Hamburg, Koper) and are declared in the free‑circulation customs regime. |
| 2. | Determination of customs value | Sum of purchase price, transport costs to the EU, insurance, and any other charges. |
| 3. | Assessment of customs duty and VAT | Duty according to the TARIC customs tariff. VAT is calculated on the sum of customs value + duty + other charges. |
| 4. | Payment of VAT and duty | Payment is usually required before the goods are released. |
| 5. | Receipt of JSD and assessment decision | JSD is the tax document for import and VAT payment. |
| 6. | Apply VAT in the tax return | Enter the input VAT in your tax return. |
Note: The tax liability arises on the day the goods are released into the customs regime (Section 23(3) of the VAT Act).
Key terms and relationships in international transport
Important terms
| Term | Meaning |
|---|---|
| Customs value | Basis for calculating duty and VAT; sum of the goods’ value, transport, insurance and other costs up to the point of entry into the EU. |
| Unified Administrative Document (JSD) | Official document of customs clearance and VAT assessment, required for claiming the deduction. |
| Incoterms | International commercial terms that define who pays transport, insurance, duty and VAT. |
| EORI number | Registration number of an economic entity in the EU customs system, mandatory for all importers. |
Differences between VAT, duty, excise tax
- VAT – refundable if the deduction is correctly applied,
- Customs duty – always a cost,
- Excise tax – e.g., on tobacco, alcohol, fuels; applied in addition to VAT.
Calculation of import VAT and practical procedure
Calculation of customs value and VAT
| Item | Amount (CZK) | Description |
|---|---|---|
| Goods price | 500 000 | Invoice price from the supplier |
| Transport to EU | 80 000 | Costs to the EU port |
| Insurance | 5 000 | Shipment insurance |
| Customs value | 585 000 | Sum of the above items |
| Duty (e.g., 3 %) | 17 550 | 3 % of customs value |
| VAT base | 602 550 | Customs value + duty |
| VAT (21 %) | 126 535,50 | 21 % of VAT base |
Practical note:
- If the goods are invoiced under the DDP term (delivery duty paid), the payment obligation lies with the seller.
- VAT can be claimed earliest in the period when the goods are released into free circulation and you have the JSD.
Documentation and correct procedure
Required documents for the deduction
- Unified Administrative Document (JSD)
- Customs authority decision on tax assessment
- Supplier invoice
- Transport and insurance documents (to substantiate the customs value)
- Payment proof (e.g., bank statement)
When can you deduct VAT?
- In the tax return for the period in which the goods were released into free circulation.
- The condition is the actual use of the goods for economic activity with a right to deduction.
Common mistakes when applying VAT:
- Missing or incorrectly completed JSD.
- Incorrect determination of customs value.
- Claiming the deduction in the wrong period.
- Failure to provide documents during a tax audit (the Czech tax authority may request all documentation).
VAT exemption and exceptions
- Shipments up to €22 were exempt until 1 July 2021; now VAT applies to almost all commercial shipments from third countries.
- Exemptions are limited to exceptional cases, e.g., charitable goods, personal belongings during moving, etc.
- Transport services of goods on import (if included in the customs value) are subject to the same rules as the goods themselves.
Practical example of VAT deduction
Example:
Company “Furniture for Home s.r.o.” imports furniture from Vietnam valued at 500 000 CZK, transport to Hamburg 80 000 CZK, insurance 5 000 CZK, duty 3 %.
| Item | Calculation | Result (CZK) |
|---|---|---|
| Customs value | 500 000 + 80 000 + 5 000 | 585 000 |
| Duty | 3 % of 585 000 | 17 550 |
| VAT base | 585 000 + 17 550 | 602 550 |
| VAT | 21 % of 602 550 | 126 535,50 |
- The company pays duty (17 550 CZK) and VAT (126 535,50 CZK).
- VAT is entered in the tax return as a deduction in the period of release into free circulation.
- Duty is a cost; VAT is refundable with proper documentation.
Process flow: From import to VAT deduction
- Obtain an EORI number – mandatory for all EU importers.
- Customs declaration and clearance – submit JSD and required documents.
- Assessment of duty and VAT – based on customs value.
- Payment of duty and VAT – before goods are released.
- Receive JSD and decision – essential for accounting and VAT.
- Post documents – into tax records/accounting.
- File VAT return – and claim the deduction.
Questions and answers (FAQ)
What if I use the goods also for non‑taxable activities?
You must allocate the proportion used for economic activity – VAT deduction can be applied only to the portion serving taxable supplies.
How do I substantiate the deduction during an audit?
By presenting the JSD, customs authority decision, invoices, transport documents and, if applicable, payment proofs.
Who is responsible for customs clearance under different Incoterms?
- EXW: Importer.
- CIF: Importer (seller pays transport and insurance, but clearance is the importer’s responsibility).
- DDP: Seller (must often be registered for VAT in the Czech Republic).
What if I sell the goods to another EU country?
If you supply a registered VAT payer in another EU state, the supply is exempt from VAT with a right to deduction, provided you document the transport and the buyer’s VAT ID.
Common errors and risks
- Undervaluing goods and insufficient documentation can lead to tax assessments, fines and customs delays.
- Incorrect calculation of customs value (omitting transport, insurance, etc.).
- Wrong or late VAT posting in the tax return.
- Confusing the roles of the VAT payer and the identified person.
Expert recommendations
- Work with a customs broker and tax adviser to minimise errors and penalties.
- Keep all documentation for at least 10 years (Czech tax authority requirement).
- Monitor legislative changes, especially VAT rates, customs tariff updates and small‑shipment rules.
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