What are Import Duties and Taxes and How Do They Work?
If you’re shipping goods from another country into your own, you’ll most likely need to pay some duties and taxes. As an additional fee to consider on top of the cost of the items you’ve bought, duties and taxes can sometimes be confusing. Although guidelines can vary by country, we’ll give you a general overview of what import duties and taxes are and how they’re calculated.
Duty and Tax Terms Defined
If you’ve been looking into how international shipping works, you’ve probably come across a lot of terminologies. Let’s define some of the most common terms you might encounter:
Value-added tax (VAT): A tax charged on a product at every stage of the supply chain. VAT is calculated as a percentage of the customs value of the goods (item + insurance + shipping) plus any duty levied.
De minimis value: A country-specific threshold below which no duty or tax is charged, and clearance procedures are minimal. Thresholds vary by country, but each threshold of duty and tax may differ (e.g., a $100 duty de minimis and a $20 tax de minimis).
Harmonized System (HS) Code: A classification system for internationally traded goods. HS codes describe the type of goods shipped, so customs can quickly identify products and apply the appropriate taxes and duties.
What are Duties and Taxes?
Duties and taxes are both types of tariffs assessed on the import of a product and are important sources of revenue and economic protection tools for the country of import.
Depending on the country of import, taxes are usually called a Valued Added Tax or a Goods and Services Tax and are similar to a national or federal-level sales tax. Most items are assessed at the same rate established by the country’s revenue or tax authority, with some exceptions.
Duties are more commodity or product-specific and tariffs are based on and assessed by the country of import’s customs authority. The rates that apply to specific types of products vary widely in the amount and way they are charged.
How to Calculate Import Duty
Import duty is typically calculated as a percentage. This percentage is based on two factors:
The total customs value of the goods (price paid of goods + insurance + international shipping)
The Harmonized System (HS) code assigned to the goods
The import duty fee is calculated by multiplying the customs value of the goods by the percentage assigned to the HS code. For example, a $100 shipment that has a 5% rate of duty as defined by the HS code would equal a $5 duty fee.
If the total declared value of your shipment is LESS than your country’s de minimis value, you do not have to pay duties or tax. However, certain goods are subject to the assessment of duty and tax regardless of a country’s de minimis value.
Do You Have to Pay Import Tax on a Gift?
Like any other shipment, import tax applies to gifts. However, a gift may be exempt from duties and tax if the total customs value of the goods is below the destination country’s de minimis value.
Exchange Rates and Import Tax
Many online stores offer payment options in different currencies. However, we recommend you pay in the local currency of the store. This helps you avoid getting charged more in a different currency due to fluctuating exchange rates
Since your country’s customs agency determines import tax and duties, you can pay these fees in your local currency. You will be billed directly by your global carrier upon receiving your package, or you can choose to pay at the time of shipping.
How and When Do You Pay Import Tax?
You can pay import tax and duties either at the time of shipping or when the package arrives at its destination.
Take&Ship offers the option to send packages with Delivery Duties Paid (DDP) for eligible shipments. This means you can pay for applicable duties directly to Take&Ship when you submit your shipping request rather than paying them in your country after the package arrives. Rest assured, DDP shipping is a guaranteed service. If you select this service and are charged additional carrier fees, Take&Ship will refund those fees. Be sure to check if your country is eligible for DDP.
You can also be billed directly by your global carrier upon receiving your package. This can be done in person at a post office when you pick up your package, or in some cases, you may be able to pay duties online.
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