The Incoterms® are globally accepted contract and delivery terms that enable all parties of a sales contract a standardized transaction in international trading business. They determine cost allocation and risk distribution as well as the due diligence obligations between the contracting partners.
The Swabian Chamber of Industry and Commerce (IHK Schwaben) now advises against using the EXW and DDP clauses in foreign trade transactions for the following fiscal reasons:
- Incoterm® EXW stipulates that the third country customer collects the goods and realizes the export in own name (i.e. with the own EORI number).
In practice, this is hardly possible due to the EU residency requirement – however, assumption by the EU-based freight forwarder is conceivable. With the freight forwarder handling customs clearance and therefore assuming the position of the exporter under customs and tax law, the seller is no longer regarded as exporter under tax law. The invoice must therefore be issued with German VAT.
- According to Incoterms® DDP, the third-country supplier becomes EU importer and is therefore entitled to deduct EU VAT.
If the EORI number of the EU company is – contrarily to contract – used in practice, it may be prohibited from refunding EU VAT.
It is recommended to use the Incoterms® clause FCA instead of the EXW clause – even if this provides for additional loading of the goods by the seller onto the buyer’s 1st means of transport.
As an alternative to the Incoterms® DDP clause, foreign trade contracts should be based on the DAP clause, which – compared to DDP – excludes the sellers responsibility for customs and tax handling in the country of destination.
Source: „IHK special – Sales tax and customs “seminar in Augsburg on 27.02.2024
