Value Added Tax (VAT)

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What Is VAT (Value Added Tax)?

Value Added Tax (VAT) is a consumption tax levied on the value added to goods and services at each stage of production and distribution. For importers, it is the tax customs collects at the border, charged on the shipment’s customs value plus any duty.

Unlike a sales tax that applies once at the final sale, VAT is charged at every supply step, with each business in the chain crediting the tax it already paid. The practical effect for cross-border trade: when your goods clear customs, the importer pays VAT as if the goods were “supplied” into the country — usually calculated as (customs value + duty + freight) × VAT rate.

Rates vary widely. The EU standard rate sits between 17% and 27%; the UK charges 20%; China charges 13% for most goods; Australia’s GST (a VAT-equivalent) is 10%. Some markets, such as the US, have no federal VAT and rely on state sales tax instead, which is why VAT typically does not appear as a customs charge on US imports.

For landed cost, VAT is usually the single largest line after the freight rate itself. Under a DDP shipment the seller accounts for it upfront; under DDU/DAP the importer pays it at clearance. Either way, the rate and the base it is calculated on decide whether your import margin holds or collapses.

If you don’t have a VAT number in the destination country, we can act as the importer of record and account for the VAT on your behalf — your goods clear without you setting up a foreign tax presence.

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