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VATupdate Newsletter Week 05 2025

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DUTY

One of the key elements of VAT is that it is charged by the supplier and can often be deducted by the customer. Only the end-consumer bears the final cost, as they cannot reclaim the VAT on their purchase. This is what makes VAT a consumption tax.

Customs duties, on the other hand, work differently. They are charged only when goods are imported and “customs cleared.” These duties are typically a percentage of the goods’ value, with rates varying depending on the product type and country of origin. Unlike VAT, import duties cannot be reclaimed. Once paid, they become part of the cost price of the goods, which the importer must factor into their pricing.

Import duties can also serve as a tool for economic protectionism—making it more expensive to import goods rather than produce them domestically. Authorities may increase duties on certain products to prevent markets from being flooded with cheap imports. However, if these goods aren’t produced locally, consumers ultimately pay the price, contributing to inflation.

As a VAT specialist, I always say that “VAT is fun.” Of course, paying taxes is never truly fun, but if you had to pick a tax to explore, VAT would be the most interesting. From online gambling to gold trading, from plant terrariums to high-speed trains—there’s always something happening in the world of VAT.

That is, until you step into the world of customs. It’s like being dragged into a bureaucratic swamp with no clear way out. You think you know what a tennis shoe is—until you try to import one into the EU and classify it for customs purposes. Suddenly, you’re knee-deep in regulations about materials, laces versus Velcro, rubber soles versus leather trims, and country-of-origin rules. Is it made in Bangladesh, India, or Turkey? Each detail can change the duty rate.

At that point, you might prefer playing at the US Open instead of Roland Garros—just to avoid discussing your entire wardrobe with customs officials at the border. But even then, customs officers worldwide are ready to inspect your luggage as soon as you step off your flight. Thankfully, as a private traveller, the clothes you wear and bring as personal luggage are usually duty-free.

So, we’ll stick to VAT—where the complexities are at least a little more fun. Stay updated with the latest VAT news on www.vatupdate.com.

If you have any comments, questions, or ideas that you want to share with us, please send us an email at [email protected] or leave a comment under the posts of this newsletter on LinkedIn.


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