With effect from 2017, responsibility for handling VAT on imports payable by VAT-registered businesses was transferred from Norwegian Customs to the Norwegian Tax Administration.
This means that VAT-registered importers no longer pay VAT to Norwegian Customs in connection with the import of goods. Instead, they record import VAT directly in their normal periodic VAT report. The same amount is deducted if the goods are intended for use in the importer’s VAT-liable business operations. Any customs duties and taxes stated in the customs declaration must be paid to Norwegian Customs as before. It will therefore still be useful to maintain a customs credit account for this purpose. For businesses who import only VAT-liable goods, the need for a customs credit account will not be necessary and potential bank guarantees will be avoided.
This offers liquidity benefits, but also imposes a greater administrative burden on importers. Companies must open separate accounts for import VAT on goods at the 25 per cent rate and the 15 per cent rate for foodstuffs. The VAT report is longer and more detailed, and requires importers and bookkeepers to have a better understanding of the regulations governing the import and export of goods, and follow them up more closely.
BDO acts as auditor for many clients who are affected by the new rules on import VAT. We have a dedicated Tax/VAT and Customs Department that helps our clients with related issues.
We have held training courses for our clients nationwide, and have received a lot of feedback and questions. We have also worked with the Norwegian Tax Administration and have received feedback on the most common mistakes that people make.
The most common mistakes are listed below:
- The account for invoiced amount used in the financial statements as the basis for recognising import VAT in the VAT report instead of the ex-VAT amount in column 46 of the customs declaration, which also appears in the statistical value in the Altinn overview. An error will then occur because of differences in exchange rates and because freight/insurance costs are not always included in the amount on which import VAT is calculated.
- Fail to add customs duties/taxes stated on the customs declaration to the amount on which import VAT is calculated. The ex-VAT amount recognised in the VAT report will therefore be too low.
- Errors in customs clearance, particularly the wrong recipient in the customs declaration. Often the name of the customer in Norway is stated instead of the importer. It is still important that the invoices are accurate and contain the correct information, making it easier for the shipping agent to declare the goods correctly.
- Accrual errors. It is the customs declaration’s shipping date that determines which period is to be used in the VAT report.
- Temporary import omitted. Around half of the expected ex-VAT amount at the zero rate was not reported to the Norwegian Tax administration in the first period. The amount on which temporary import VAT is calculated must be recognised in section 11 of the VAT report.
- Problems distinguishing between VAT at 15 percent and at 25 percent, which must be recognised in sections 9/10 and deducted in sections 17/18, since it is no longer stated in the customs declaration. Nevertheless, the companies themselves must know the percentage rates.
- Recognition of “Export of VAT exempt goods and services” in the VAT report is new. Incorrect recognition of the amount on which VAT is calculated in section 8 in the VAT report is due to the fact that only VAT-exempt revenues must be recognised, not, for example, reimports of defective/incorrect goods or the cancellation of sales.
- Missing accounting vouchers. All customs declarations that are listed in the Altinn overview must be kept along with the accounts for ten years.
- Incomplete “audit trail” between the customs declaration, the invoice and payment.
- Use of proforma invoices instead of the commercial invoice. The proforma invoice may differ from the commercial invoice, which leads to an incorrect declaration.
- Failure to maintain separate accounts for the amounts on which VAT is calculated and the VAT amount itself.
- Failure to submit the VAT report in time.
If the VAT report is not submitted by the deadline or it contains obvious errors, the Norwegian Tax Administration is entitled to impose a coercive fine. The equivalent of half of the standard court fee may be imposed per day, up to a maximum of 50 court fees. In 2018, the standard court fee is NOK 1,130. See attached information from the Norwegian Tax Administration.
Incorrect customs declarations for imports/exports could result in Norwegian Customs imposing a non-compliance penalty. The size of the non-compliance penalty depends on the nature of the non-compliance and whether it is a first-time offence or has occurred several times before.
If an insufficient amount of duty is declared, this could still lead to a recalculation in arrears and the imposition of supplementary charges by Norwegian customs.
If the importer itself discovers the error and corrects it, no supplementary charge will be imposed.
It is therefore important that importers themselves verify that the shipping agent completes the customs formalities correctly to avoid checks, recalculation and supplementary charges.
For exporters, it is also important to issue accurate invoices containing a precise description of the goods and attach documentary evidence of origin, if the exported goods meet the requirements for EUR-1/invoice declaration. This will reduce the risk of incorrect tariffing to the customer/buyer’s receiving country and could result in the customer/buyer paying a lower rate of duty.