Breadcrumbs DSV MCF > Make or Buy > Europe and VAT > Limited Fiscal Representation

Limited Fiscal Representation

Limited fiscal representation allows goods to be imported into the EU without paying import VAT. This offers a significant liquidity advantage. The video on this page shows how it works:

Maco Limited Fiscal Representation

When importing goods into the European Union, the EU VAT system causes a considerable liquidity disadvantage to businesses. This disadvantage can be prevented by importing goods using limited fiscal representation (LFR).

LFR can be used when goods are imported into one EU member state, but are sold to a company in another EU member state. For example, if a US company sells goods to a German company via a harbor in the Netherlands.

Custom clearance must take place at the EU’s external border, fulfilling all import duties and other import obligations. By making use of LFR, the VAT does not have to be paid on the import declaration. Instead, the customs broker, takes over the VAT obligations for the shipment. After the import formalities have been completed, the goods are in free European circulation and can be transported to their destination.

The customs broker transfers the VAT from its VAT account to the VAT account of the buyer in Germany/France (please watch the video to see how this works). The broker lists and declares an intra-Community delivery at its tax office and report the transaction in its monthly statistics declaration. The buyer in Germany/France reports an intra-Community acquisition to its tax authorities, to make the data and reports match.

In this way the importer can import the goods without paying import VAT. Note: If it had imported the goods through a German or French harbor, it would have had to pay the import VAT, which would have been refunded at least one month later.

The possibility of using LFR adds to the competitiveness of The Netherlands compared to German or French ports.