By Eric Huang.    Photo：Tiger Lily

In the post-epidemic era, in order to avoid repeating the nightmare of global supply chain disruption during the pandemic, many international traders are focusing on how to reduce the transportation distance and time of products from the place of production to consumers, thereby improving transportation efficiency and reducing transportation costs. Therefore, short-chain logistics has become prominent, and the most important thing in short-chain logistics is the setting of overseas warehouses. Setting up overseas warehouses can not only avoid time delays in cross-border transportation, but also respond to the market in the first time, so that merchants can adjust inventory flexibly to avoid missing sales opportunities.

As a gateway for foreign traders to enter the EU, the Netherlands not only benefits from the geographical advantages of the Port of Rotterdam on shipping routes, but also because of the implementation of the Dutch government's Import VAT Deferment License (also known as Article 23 permission). Most goods imported into the Netherlands from outside the EU are subject to VAT. Importers must pay the corresponding duties and VAT at the time of custom clearance. If the goods are imported for commercial purposes, the importer can claim a VAT refund after the goods are sold. However, if the importer declares the import with the permission of Article 23, the payment of the import VAT can be postponed to the regular VAT return, and it can be directly offset after the goods are sold. If the operation of the bonded warehouse is applicable, no cash flow will be generated (called "import VAT deferment" or " the reverse charge VAT on import " ).

If a non-Dutch registered company wants to apply for an Article 23 permission, it must appoint a local financial representative in the Netherlands to apply for and implement this Import VAT Deferment. To serve as a financial representative, an application must be made to the Dutch authorities, and the business can only be carried out after obtaining a license. In general, the following, among others, can act as fiscal representatives in the Netherlands: Tax consultant / Lawyers / Chartered accountants and sworn accountants / Notaries / Forwarding companies and customs agents. There are two types of financial representation licenses, one is a limited financial representative; the other is a general financial representative.

A limited fiscal representative is to include the foreign trader's transactions in their own VAT report and therefore does not require the foreign trader to register for VAT in their own name. This type of financial representative can only act on behalf of a trader established outside the Netherlands and can only be used in certain circumstances. Companies that bring goods into the Netherlands or buy and sell services from other EU countries cannot use such a representative. When a foreign trader conducts intra-EU transactions, the fiscal representative's VAT identification number must be indicated on the invoice. Foreign traders who assign limited financial representatives can only engage in B2B business in the EU region, because they cannot directly issue VAT invoices to final consumers.

General fiscal representative is to assist foreign traders to register the Dutch VAT number in their own name. This allows foreign traders to apply for an Article 23 permission. If granted, it would mean they would avoid having to pay VAT when clearing imported goods in the Netherlands. Conversely, this import VAT can be deferred to the regular VAT return and the VAT can be directly deducted when the goods are sold. If the foreign trader has appointed a Dutch financial representative with a general license, the VAT identification number, full name and address of the financial representative need to be stated on the invoice issued by the foreign trader. Since foreign traders have their own VAT identification numbers, they can directly issue VAT invoices to final consumers. Hence, foreign traders with Article 23 import permission can engage in B2B and B2C business in the EU.

In short, the bonded warehouse in the Netherlands not only has geographical advantages for foreign traders entering the EU market, but also has VAT deferment benefits, which can reduce the cash flow pressure on foreign traders. As short-chain logistics is prevalent on the international trade battlefield, it is an excellent strategy!

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