Import VAT Deferment in the EU: A Trade Tool in the Era of Reciprocal Tariffs
Amid escalating global trade tensions and evolving tariff policies—particularly under the Trump administration’s push for “reciprocal tariffs”—the EU’s VAT system has come under scrutiny. While some critics argue that VAT functions as a hidden trade barrier, this perspective often overlooks the mechanisms within the system that support international trade, such as import VAT deferment. Import VAT deferment is a tool available in many EU Member States that can significantly ease the financial burden on businesses importing goods.
João Veiga, Senior Manager at Ryan’s VAT Compliance and Consulting practice, explores how import VAT deferment works, why it matters in the current trade landscape, and how businesses can leverage it to remain competitive and compliant.
Is VAT a Hidden Trade Barrier? Debunking Common Misconceptions
The Trump administration has long argued that the EU’s VAT system creates an uneven playing field. The core of the argument is that U.S. exports to the EU are subject to VAT and customs duties, while EU exports to the U.S. face only low tariffs, and no equivalent consumption tax at the federal level, with such being portrayed as a form of protectionism.
The argument, however, mistakenly treats VAT and tariffs as if they are the same thing, even though they are fundamentally different types of taxes. EU VAT is not a trade barrier—it is a neutral consumption tax, applied equally to all goods sold within a Member State, regardless of origin. While VAT is indeed levied on imported goods, it is correspondingly applied on domestically produced goods which are sold for consumption in the concerning EU Member State.
Understanding the EU VAT System
On an EU level, VAT is a consumption tax levied on goods and services at each stage of the supply chain but ultimately paid for by the final consumer. It is border-adjusted, meaning exports are exempt from VAT to avoid double taxation, while imports are taxed at the same rate as domestic products. This system ensures that consumption is taxed where it occurs, not where goods are produced—promoting tax neutrality and preventing distortion of trade flows. These principles are aligned with World Trade Organization rules and are standard practice in VAT systems worldwide.
Import VAT vs Tariffs: Key Differences for Global Trade
This marks a key distinction from import tariffs, as foreign producers are not in fact disproportionately levied with an additional tax at the border, and, crucially, import VAT is typically recoverable by the importer, meaning it does not represent a net cost to businesses.
What Is Import VAT Deferment and How Does It Support EU Trade?
To further ease the financial and administrative burden on businesses, many EU Member States offer import VAT deferment schemes. These allow importers to postpone VAT payments until their periodic VAT returns are filed, rather than paying upfront at the border.
Country-Specific VAT Deferment Schemes
In countries like the Netherlands, businesses can apply for an Article 23 license, enabling them to account for import VAT via a reverse charge mechanism—reporting and reclaiming the VAT in the same return, resulting in no actual cash outflow. Similar arrangements exist in Belgium and other EU Member States, with varying degrees of complexity depending on local regulations. These schemes are particularly beneficial for cash flow management and are widely used by both domestic and foreign businesses—including many of our clients who rely on them to streamline operations and maintain liquidity across EU supply chains.
By understanding the EU’s VAT system and the available deferment mechanisms, businesses importing into the EU can optimise cash flow, reduce administrative burdens, and ensure VAT compliance—all while maintaining competitive pricing in their destination markets.
How Ryan Can Help
In an increasingly dynamic global trade environment, keeping up to date on evolving tax policies and compliance requirements is crucial for managing supply chain risks and minimising business disruption.
Ryan's VAT practice supports clients across the EU and beyond, in over 50 countries, navigating the complexities of international trade taxation. We provide tailored solutions that account for local specificities, including strategies to liberate cash flow, through import VAT deferment arrangements and other optimisation tools.
Contact Ryan to optimise your import VAT strategy, improve cash flow, and simplify cross-border compliance.