Correct rating may involve substantial savings(Taxwatch (Tax news in english))
10-03-2010 07:20
Af
Dorthe Higham
Businesses, importing products from countries outside the EC pay customs. The seize of the customs depend on the type of products. For instance on canned tuna, customs must be paid with 24 % of the invoice price, while the duty on golf equipment is only 2.7 %.
The rate follows the product code, which has been fixed for certain products. Both the rate and the code are fixed by WTO. Two products that almost seem identical, may easily have different product codes.
To find the right product code – which is called rating – therefore may be a difficult task. Nevertheless, we often see examples of businesses, which in spite of substantial customs expenses, do not spend many resources to secure a correct rating. Often the rating is handed over to the shipping agent used by the business. This is not always a good idea, because the shipping agent seldom has the - or do not ask for the - pertinent information on the single products.
A recent decision made by the central tax authorities, shows that this may have serious economic consequences. The concrete case was about a business that imported catalysts to Denmark. In connection with a review of the business’s customs position, it was revealed that the product code, which was used for the catalysts most likely, was incorrect. On behalf of the business therefore we applied for a so called BTO – which is binding rating information. This involves that the authorities take a concrete stand with regard to the product code for a certain product.
In this case the customs authorities agreed with us that the used product code was incorrect and they approved a new product code. This resulted in a substantial reduction of the customs rate. The business applied for a refund of customs for previous years and obtained a refund of approximately DKK 2.000.000. In addition to that came also the future customs savings.
The example shows that it can be a very good idea to review the business product codes in order to secure that the correct product codes are applied.
Questions regarding the above can be addressed to Dorthe Higham at dhi@bdo.dk
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