Limited fiscal representation (LFR)
Import VAT needs to be paid on imports into most of the EU Member States. However, the importer can reclaim this VAT from the Dutch Tax and Customs Administration. Under certain conditions, import VAT does not need to be paid on goods imported into the Netherlands. This Dutch system can be used by businesses in other EU Member States or non-EU Member States to not pay import VAT, creating improved liquidity. Clearing goods with limited fiscal representation has another important advantage: the goods are released after the import declaration and may be transported without supervision by the customs authorities. The saying ‘Logistics leads Customs’ is then fully accurate.
Limited fiscal representation (LFR) can be applied to the import of goods into the Netherlands which are destined for businesses located in another Member State. For example, if a German importer imports goods via Hamburg, they have to pay German import VAT which can be reclaimed afterwards. But, if these goods enter the EU through Rotterdam, the German importer does not need to pay import VAT. Instead, the VAT is settled between the customs broker who makes the import declaration in Rotterdam and the German importer.
All import duties and other VAT obligations are payable when submitting an import declaration with LFR. However, the VAT obligations are taken over by the limited fiscal representative making them responsible and liable for VAT upon importation. Once the import declaration has been made, the goods count as free goods without customs obligations and can be transported to Germany without customs interference, lending greater flexibility to the logistics process. The limited fiscal representative must now deliver the goods to the German importer for VAT purposes, which means that they must meet all the obligations associated with an Intra-Community supply from the Netherlands to Germany.
The limited fiscal representative must be authorized to act as a limited fiscal representative. This authorization is usually granted by the German importer but can also be issued by the seller from the USA. Subsequently, the customs agent must check the VAT number of the person or business who bought the goods. The limited fiscal representative must then include the supply subject to VAT in the monthly listing and report all necessary data to Statistics Netherlands on a monthly basis. The limited fiscal representative therefore acts as if they are selling the goods into Germany themselves.