When foreign entrepreneurs import goods into the EU, they generally have to pay import VAT. This import VAT can later be reclaimed by the foreign entrepreneur through the Dutch VAT return. However, this poses a significant liquidity disadvantage. Under certain conditions, a foreign entrepreneur does not have to pay import VAT, namely through fiscal representation.
Foreign entrepreneurs can use the Dutch system of fiscal representation, which means they do not have to pay import VAT; instead, it is reverse-charged to the Dutch VAT return. This provides a significant liquidity advantage. Another benefit of importing goods with fiscal representation is that the goods, after the import declaration, are free and can be transported without customs supervision. The adage ‘Logistics leads Customs’ is fully applicable here.
The Netherlands offers two forms of fiscal representation: general fiscal representation and limited fiscal representation. Below, we take a closer look at limited fiscal representation (LFR).
Limited Fiscal Representation (LFR)
We offer LFR for the import of goods and the subsequent delivery. This subsequent delivery must be made to another member state with 0% VAT as an intra-community delivery. For example, if a German importer imports goods via Hamburg, they must pay German import VAT, which can only be reclaimed later through the German VAT return. However, if the same goods enter the EU via Rotterdam, the German importer does not have to pay import VAT, but the VAT is reverse charged to the Dutch VAT return. The goods can then be forwarded to Germany with 0% VAT as an intra-community delivery.
LFR is only possible for B2B transactions and not for B2C transactions.
Distribution Country
The system of limited fiscal representation is very flexible, and distributors and logistics companies can fully benefit from this. Many foreign companies that transport goods via the Netherlands use LFR due to the liquidity advantage and logistical flexibility. Because the Netherlands is a key distribution hub, the technique of declaring with LFR is widely applied.
We have been offering LFR for years and are true specialists in this field. If you are interested, feel free to contact us, and we will explore the possibilities together.
