Taxes when Shipping to Non-EU Countries

Shipping goods abroad to both European Union (EU) and non-EU countries can present both opportunities and challenges for companies in Switzerland. Understanding the tax implications, including customs duties, import taxes, and value-added tax (VAT), is crucial for smooth cross-border transactions and accurate financial planning. In this article, we will delve into the tax factors that Swiss exporters should consider when shipping to both EU and non-EU countries, as well as provide a broad overview of some other general considerations.

What Needs to be Considered when Shipping Goods Abroad?

While the rise in cross-broader trade and online shopping has created many new opportunities for retailers around the world, it does come with additional complexities, costs, and regulatory requirements. These all need to be clearly understood and taken into account when determining whether it will be profitable to enter the market of cross-border online trade.

Swiss companies who export their goods abroad should pay attention to the following main issues:

• Customs duties: Customs duties are taxes levied on goods that are imported or exported across international borders.
• Import sales tax / VAT in the destination country: Import VAT (Value Added Tax) is a tax levied on goods that are imported into a country. It is typically charged as a percentage of the value of the goods, including any customs duties and other charges. The rate of import VAT is set by the destination’s tax authorities and varies by country and by the type of goods being imported.
• Domestic VAT: Domestic VAT refers to the Value Added Tax payable in the country of origin (in this case, Switzerland) by the company who is exporting goods. In most cases, exported goods are exempt from domestic VAT.
• Other general considerations: Swiss companies shipping their goods abroad must also consider factors such as existing trade agreements, packaging and labelling requirements, transport and logistics, and documentation and compliance.

Differences when shipping goods to EU vs non-EU nations

Switzerland is not a member of the European Union but is closely linked to the EU economically through several bilateral agreements, including the free movement of people, goods, and services. This means that while the EU has its own distinct customs laws and import taxes, cross-border trade with the EU is highly simplified for Swiss companies.  

When it comes to cross-border trade with non-EU nations, the situation is not always as straightforward. Aspects such as customs duties, import taxes, and other issues related to trade agreements, compliance, documentation, etc. can vary greatly depending on the specific country in question. In this sense, there is no “blanket solution” which applies to all non-EU nations, but rather the situation must be considered with respect to the destination country’s own import tax laws along with their existing trade relationship and agreements with Switzerland.

We will explore the differences when shipping goods to EU vs non-EU nations in relation to the main considerations which were previously mentioned:

Customs Duties

Customs duties are taxes imposed by governments on imported goods. They are calculated based on a variety of factors, including the value of the goods, their country of origin, the quantity being imported or exported, and their classification according to a standardised system known as the Harmonized System (HS).

Customs duties are also affected by any trade agreements or tariffs in place between the importing and exporting countries. In this respect, we see that there can be major differences in customs duties when exporting goods to EU countries compared to non-EU nations.

Customs duties when shipping to EU countries

Switzerland has various free-trade agreements with the EU which provides preferential treatment when it comes to exporting goods to EU nations. Under these agreements, customs duties are greatly reduced or eliminated altogether on qualifying goods. This is not necessarily the case for all categories of goods, for example, excise goods such as tobacco and alcohol do not enjoy the same level of preferential treatment, as they are typically governed by separate agreements and regulations.

To utilise these advantages, exporting companies must acquire valid proof of origin, such as a movement certificate “EUR.1” or a declaration of origin on the invoice.

Customs duties when shipping to non-EU countries

When exporting goods to non-EU countries, Swiss companies must pay careful attention to the specific rules and tariffs which apply. The duties will depend on the specific customs laws in the destination country, along with any bilateral agreements in place between Switzerland and the country in question. Typically, Swiss companies exporting to non-EU countries should expect to pay higher customs duties on average compared to shipments to the EU.

Fortunately, Switzerland has signed bilateral free trade agreements with several countries outside of the EU, including China, Japan, Canada, Singapore, Turkey, Norway, Iceland, and Liechtenstein, among others. These agreements aim to reduce or eliminate trade barriers, such as customs duties and quotas, between Switzerland and these countries. In addition to these bilateral agreements, Switzerland is also a member of the European Free Trade Association (EFTA), which consists of Iceland, Liechtenstein, Norway, and Switzerland, and has free trade agreements with the EU member states as well as several other countries outside of the EU.

Import VAT

Import VAT, or import sales tax, is the VAT levied on goods which are imported into a country. It is collected by the customs authorities of the importing country and is intended to ensure that imported goods are subject to the same tax treatment as similar goods produced domestically.

The rate of import VAT charged depends on the destination country’s VAT rates, which vary significantly across nations. Some nations also have applicable delivery thresholds below which the imported goods are not subject to import sales tax.

Import VAT when shipping to EU countries

Swiss retailers who ship goods to EU nations are liable to pay the import VAT to the specific destination country’s tax authorities subject to certain delivery thresholds being met.

Prior to the recent updates in EU mail-order regulation, foreign retailers were only required to register for, and pay VAT in a destination country if the country-specific delivery threshold was exceeded. These thresholds ranged from EUR 35,000 to EUR 100,000 in the EU.

However, since 1st July 2021, the previous delivery thresholds have been replaced by the EU’s new “distance selling regulation”. Under these new regulations, online retailers are required to pay sales tax (VAT) in the destination country where the item is delivered to if they exceed a total delivery threshold of EUR 10,000 per calendar year for goods sold within the entire EU. If their total turnover from goods sold in the EU is below this threshold, they do not need to pay VAT in the destination country.

These new regulations mean that most Swiss companies with a notable turnover within the EU will have to pay the import VAT on all their EU shipments.

Small consignments and the import one-stop shop (IOSS)

In addition to the overall delivery thresholds, there were also thresholds on the value of individual of consignments.  Previously, imported consignments below a threshold value of EUR 150 were exempt from having to declare and pay VAT. However, under the new regulations, import sales tax must now be paid on all commercially imported goods, irrespective of their value.

To ease the administrative burden for sellers shipping small consignments to the EU, the “import one-stop shop” (IOSS) was introduced. The IOSS regulations apply to imports from non-EU countries with a material value under EUR 150. It enables online retailers to submit their IOSS-eligible EU sales to a central EU tax office in a single tax return. These retailers are exempt from having to register for and pay import tax to each particular EU nation that they ship to if the sales are all eligible for IOSS.

For larger consignments with a material value exceeding EUR 150, the IOSS system cannot be used and the seller is required to register for and pay VAT in the destination country if they exceed the overall delivery threshold of EUR 10,000. The registration must be done with the help of a fiscal representative in the EU nation in question.

Import VAT when shipping to non-EU countries

As with EU nations, the general rule when shipping goods to non-EU countries is that the VAT is payable in the destination country. The specific rate of VAT charged depends on the importing country’s VAT rates.

Many countries may impose their own delivery thresholds above which the Swiss exporter must register for and pay the VAT on their exports to the destination country. If these overall delivery thresholds are not met, the VAT is typically paid by the importer / forwarder of the goods in the destination country who then recovers this amount from the final consumer.

Additionally, some countries may exempt certain types of imports from paying import sales tax, along with applying delivery thresholds for small consignments, below which no import VAT would be levied. It is important for Swiss companies exporting outside the EU to fully understand the specific customs and import VAT regulations in the destination country to know what VAT they are liable to pay and to remain fully compliant with all customs regulations.

When is domestic VAT in Switzerland payable?

Generally, goods which are exported from Switzerland, whether to the EU or outside, are exempt from Swiss VAT.  To claim the VAT exemptions, companies must provide evidence that the goods were exported, such as the customs receipt or an electronic export declaration.

Other considerations

In addition to customs duties and VAT, there are several other considerations that Swiss companies need to take into account when shipping goods abroad, whether to the EU or to non-EU nations:

Trade agreements

Some countries have trade agreements in place that provide preferential treatment or reduced tariffs for goods originating from certain countries. The existence of such agreements can lead to a more cost-effective and streamlined shipping process.

Switzerland has extensive trade agreements in place with the EU and the rest of Europe, as well as with numerous countries outside of Europe. The exact conditions of the agreements and the extent to which preferential treatment is given can vary significantly. It is essential for Swiss companies to be aware of such agreements and use them to optimise international trade operations.

Packaging and labelling requirements

Different countries may have specific packaging and labelling requirements that must be met to ensure compliance. These requirements can include product labelling, language requirements, and specific packaging standards.

In general, these requirements are relatively uniform throughout the EU and similar to Switzerland’s own standards. When shipping outside the EU, companies should conduct additional research to ensure they understand and comply with the individual packaging and labelling requirements in the specific destination country.

Transport and logistics

Efficient transportation and logistics are vital for successful international trade. Working with experienced freight forwarders and logistics providers can help streamline the shipping process and ensure goods reach their destination on time and in good condition.

Logistically, it is easier for Swiss companies to ship goods to other European nations. The free movement of goods along with the geographical proximity makes it straightforward and affordable.

When shipping to countries outside of Europe, there may be additional factors to consider. The increased distances, along with additional rules and regulations to adhere to, can lead to greater complexities and costs in respect to transportation and logistics. These should be clearly borne in mind before deciding to undertake export operations outside of Europe.

Documentation and compliance

Exporting goods requires specific documentation, such as commercial invoices, packing lists, and certificates of origin. Adhering to the customs requirements and regulations of the destination country is crucial to avoid delays or penalties.

Documentation and compliance requirements are generally simpler and more predictable when shipping to the EU. When shipping to countries outside the EU, Swiss companies will have to pay closer attention to the individual documentation requirements and compliance rules of the destination country, as there can be significant variations and differences across jurisdictions.