Why are there freight forwarding companies with and without tax inclusion in cross-border logistics?

Why do freight forwarding companies with and without tax inclusion exist in the cross-border logistics market? Very simple point, because there are two kinds of demand in the market including tax and no tax. Any company will be guided by market demand, and there are companies with two marketing models in the cross-border logistics market due to the two demands of tax inclusion and non-inclusion.

Tax package, simply speaking, refers to the logistics company for the seller’s goods customs declaration, the seller does not need to provide their own VAT tax number. General package duty refers to double clearance package duty, double clearance refers to the export country’s declaration, and the import country’s customs clearance. The term DDP refers to Delivered Duty Paid, which means logistics companies are responsible for all the services provided by cross-border sellers from export customs declaration, ship distribution, order change at destination port, customs clearance and tax payment.

Before the European VAT inspection, double package tax has been the mainstream of cross-border logistics industry. Because it is very convenient, the seller only needs to give the goods to the logistics service provider, you can sit and wait for the goods, as for the middle of the transportation will appear any problems that are not the seller need to worry about things.

In September 2015, the European Commission urged member states to increase VAT collection and pointed out that eBay, Amazon and other platforms should be jointly and severally liable for all unpaid VAT and illegal traders. Subsequently, the VAT tax number of sellers on cross-border e-commerce platforms was upgraded again and again.

In September 2016, Finance Act 2016 came into effect in The UK. HMRC strengthened VAT legislation for overseas enterprises, requiring overseas merchants to register FOR VAT in the UK. HMRC has more rights to deal with overseas sellers who evade VAT.

In 2017, Amazon platform conducted a random check on sellers’ tax numbers. Sellers who failed to register for VAT or upload VAT after registration were barred. This VAT incident has made all cross-border e-commerce sellers and freight forwarding industry practitioners in Europe experience a “big earthquake”, and the industry has undergone a rapid reshuffle.

Why are there freight forwarding companies with and without tax inclusion in cross-border logistics?Not only the sellers of the platform were blocked due to VAT, but also many freight forwarding companies engaged in the tax-collecting channel of European sites also faced closure due to the strict inspection of the e-commerce platform, resulting in joint fines, failure to collect payment, and problems in the capital chain.

It is also after the VAT incident that e-commerce goods shipped to Europe without tax has become the mainstream trend. In a lot of European site sellers need to re-contact not tax channels, as early as in this channel for many years of deep cultivation of 18 supply chain stood out, has always insisted on their original intention to this industry, come to today, of course, this is also a later word.

When the EU carries out tax reform, e-commerce platforms are involved, and the platforms implement the system of collection and payment and play a supervisory role. Therefore, sellers who want to operate on Amazon and other cross-border e-commerce platforms must have their own VAT account.

Cross-border e-commerce sellers use their VAT account and EORI account to clear customs and pay relevant taxes. Then the forwarder needs to submit the seller’s VAT account for customs declaration at this time, and the customs department will provide the tax bill for confirmation after the completion of customs clearance.

In fact, double clear package tax this channel in the seller’s business point of view, is a non-compliant and risky transport channel. Before the EU did not strictly regulate the VAT of cross-border stores, cross-border e-commerce sellers could avoid paying VAT without using their OWN VAT account, which mainly refers to sales VAT. But dodging taxes is illegal in any country.

Here we do not discuss how the profit of double clearing package tax comes, this is the business model of peers after all, they are also to meet the needs of customers, but double clearing package tax is unknown to logistics providers or sellers. After all, non-compliance tax payment is not allowed in any country, especially in developed countries. If cross-border sellers insist on double tax clearance service, please pay attention to the following points:

Looking for a local trading company in Europe can have local logistics, in customs clearance, logistics business whose VAT and EORI customs clearance, you can not care too much. However, after completion of the goods in customs clearance, need for logistics providers in the local tax payment status of the goods, sold to sellers selling need to prepare the VAT (namely the method of make account book, virtual trade), so you can prove that the goods are the input, without doing this, the goods is no input, from a certain perspective, this belongs to “steal” to sell goods.

Of course, double clear package tax for logistics, the risk is also great, can carry the customs to catch up with the inspection of the old account, basically not a few.

Therefore, under the channel of double clear package tax, it is a big test for cooperative freight forwarding companies. This requires freight forwarding enterprises to have certain customs clearance strength in the destination country. In general, a freight forwarding enterprise can only provide targeted tax services for a certain line or a certain country.

All routes and all countries should do well in the tax package service, not to say that there is no such thing, but it is difficult to do so, which requires the freight forwarder company to have a strong agent in all destination ports and have certain relations to ensure the security of customs clearance of the cargo.

Because there is such a demand in the cross-border logistics market, there are two kinds of transport channels including tax inclusion and non-tax inclusion. However, if which channel is the most appropriate, it can only be said that cross-border sellers will have different VAT policies according to their own needs. VAT is strictly controlled in The European market, while VAT is loosely controlled in the US.

However, the 18th Supply Chain reminds cross-border e-commerce sellers that European e-commerce platforms and customs authorities are now paying more attention to VAT from overseas sellers. I believe you have also seen the recent “aftershock” of the Amazon platform, the platform will only become more and more strict on sellers, so in order to long-term operation, it is necessary to operate the European market in compliance, and compliance operation includes product compliance and tax compliance and other content.

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