The rules for customs representation and Import VAT handling are becoming stricter
Starting in March 2025, stricter regulations will come into effect that will significantly impact importers and customs representatives. This means that goods can only be cleared without paying VAT through self-assessment if certain conditions are met.
The upcoming changes, which will take effect in just a few days, are likely to have a negative impact on the Hungarian market. Several points of the Hungarian VAT law will be amended in March 2025. Let’s take a look at the customs changes that companies involved in export and import need to pay attention to.
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What changes are coming in the field of customs matters?
One of the most significant changes is that the import VAT deduction right of the indirect customs representative will be tied to a new requirement: the so-called reliable taxpayer status. This means that an indirect customs representative can only exercise the right to deduct on behalf of the importer if they are a monthly VAT filer and can prove that they are not considered a high-risk taxpayer. The partner verification and risk assessment must be conducted by the indirect customs service provider. Clearly, this will impose additional burdens and increase risks for indirect customs representatives. Additionally, a change will occur in that, to ensure customs supervision, the authorities may temporarily place goods being imported to or exported from the EU customs territory under regulatory control.
But how might all of this impact the market?
According to the EU’s unified customs regulations, importers can request customs procedures in any member state’s customs authorities for goods imported from third countries. However, in Hungary, the import VAT is 27%, which is considered particularly high within the EU’s internal market, resulting in a competitive disadvantage for our customs service market. This disadvantage was previously mitigated by the practice that allowed for the self-assessment of import VAT.
For a member state, it is advantageous from several perspectives if more businesses choose it as a customs clearance location. The customs revenues benefit the member state performing the customs clearance, but the true advantage lies in the fact that customs clearance entails numerous additional services. These include logistics services, transportation, road usage fees, and warehousing. If businesses wish to carry out customs clearance in a particular member state, it can also position that state as a customs and logistics hub. This is especially important if the given state can provide the most favorable and optimal customs clearance conditions.
In other words, the import VAT that is inherently deductible did not need to be paid during customs clearance; instead, customs representatives treated it as an accounting entry. This clearly simplified and made the process more cost-effective, allowing Hungary’s EU customs clearance services to remain competitive even with the high VAT burden.
This practice simplified and made the process more cost-effective, allowing Hungary’s EU customs clearance services to operate competitively despite the high VAT burden. However, with the new regulations, the customs clearance process will become more expensive and complex, as importers will have to consider whether to pay the 27% VAT or choose a customs representative with reliable taxpayer status, while also ensuring they meet the new requirements: they must be a monthly VAT filer and cannot be classified as a high-risk taxpayer.
It is important to note that businesses can only obtain reliable taxpayer status after three years of activity, thus newly established companies will be excluded from the eligible group. The changed environment presents significant challenges for importers, as the process will be more complicated, riskier, and more costly, which could lead importers to initiate customs clearance in another member state instead of Hungary. This would affect Hungarian businesses and the Hungarian customs clearance market.
Analyzing the effects of the changes and developing the appropriate strategy may be crucial for successful operations in the market. In order to maintain competitiveness, it is advisable to assess the logistics processes and optimize operations within the framework of the new regulatory environment.
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Read our article titled “Introduction to the World of Customs and Tax Burdens,” where you can find answers to numerous questions!