VAT (Value Added Tax)
Consumption tax charged on imports in many countries.
Definition
VAT (Value Added Tax) is a consumption tax applied to goods and services at each stage of production and distribution. For imports, VAT is typically charged on the customs value plus any import duty (CIF + duty). VAT rates vary by country (UK: 20%, EU: 17-27%, Australia's GST: 10%) and product type. Unlike duty, VAT is usually recoverable for businesses but represents a real cost for consumers. VAT is called GST in some countries (Australia, Canada, India).
Why It Matters
Import VAT can significantly increase landed costs—often more than duty itself. A 20% VAT on a $1,000 shipment with $100 duty means $220 in VAT ((1000+100)×20%). For businesses, understanding VAT recovery rules helps manage cash flow. For consumers, VAT is an unrecoverable cost that must be factored into pricing.
Example
You import goods to the UK. CIF value: $1,000, Duty (5%): $50. VAT is charged on CIF + duty: ($1,000 + $50) × 20% = $210. Total import charges: $260.
Landed Cost Calculator
Estimate total import costs including duty, tax, and shipping fees.
Related Terms
GST (Goods and Services Tax)
Consumption tax similar to VAT, used in Australia, Canada, and others.
Import Duty
Tax charged by customs on imported goods.
Customs Value
The value used by customs to calculate import duties.
CIF (Cost, Insurance, Freight)
Customs valuation method including goods, shipping, and insurance.
Frequently Asked Questions
Can businesses recover import VAT?
Usually yes, if you're VAT-registered and the goods are for business use. Import VAT is treated like any other input VAT and can be reclaimed on your VAT return. Consult your accountant for specifics.
Is VAT calculated on the duty amount?
In most countries, yes. VAT is typically charged on (customs value + duty). This means you pay 'tax on tax'—the VAT base includes the duty you're paying.
Related Resources
What is Landed Cost?
Complete guide to import duty and tax
ToolLanded Cost Calculator
Estimate import duty, tax, and total cost
DefinitionGST (Goods and Services Tax)
Consumption tax similar to VAT, used in Australia, Canada, and others.
DefinitionImport Duty
Tax charged by customs on imported goods.
DefinitionCustoms Value
The value used by customs to calculate import duties.