Taxually - What Is Import VAT in the UK and EU?

What Is Import VAT in the UK and EU? A Complete Guide for 2025

Find out more about import VAT in the UK and EU and its relevance for businesses worldwide.

Import VAT is a crucial part of cross-border trade—and one that businesses often underestimate. If you're importing goods into the EU or UK, you’ll usually need to pay VAT on those goods at the border, even if they’re for resale or business use.

But the rules, relief schemes, and accounting methods differ significantly depending on where your goods are headed—and getting it wrong can mean overpaying, customs delays, or compliance issues.

In this guide, we’ll explain:

What import VAT is and why it exists
How import VAT is calculated in the UK and EU
The differences between UK and EU rules post-Brexit
How tools like Postponed VAT Accounting (PVA) and the Import One-Stop Shop (IOSS) work
Ways to reclaim import VAT and improve cash flow
How import VAT interacts with customs duty, exemption schemes, and VAT compliance automation

Key Takeaways

Import VAT applies to goods entering the UK or EU from outside their VAT areas, and is calculated on the full customs value.
Tools like Postponed VAT Accounting (UK) and IOSS (EU) let businesses manage or avoid upfront VAT payments to improve cash flow.
VAT-registered businesses can usually reclaim import VAT, but proper documentation is essential to stay compliant.

What Is Import VAT?

Import VAT is a tax charged on tangible goods imported into the UK or EU from non-VAT territories. Its purpose is to ensure that foreign goods are treated the same as domestic ones for tax purposes—avoiding an unfair pricing advantage.

While the core principle is the same across the UK and EU, the way import VAT is applied, calculated, and reclaimed differs significantly depending on your location, the value of your goods, and the nature of the transaction.

Import VAT in the EU: How It Works

EU flag with yellow stars on a blue background waving in the wind.

When EU Import VAT Applies

Import VAT in the EU applies when:

Goods enter the EU from a non-EU country (e.g. China, UK, USA)
The shipment value exceeds €150 (unless the seller uses IOSS)
The buyer is located in the EU’s VAT zone

How It's Calculated

The VAT amount is calculated based on the customs value, which includes:

The price of the goods
Shipping and insurance costs
Import duties and other fees

The standard formula for calculating import VAT can be represented as follows:

Import VAT=(Value of the Goods+Duty)×VAT Rate

📦 Low-Value Goods and IOSS

Goods valued under €150 may qualify for the Import One-Stop Shop (IOSS) scheme. This allows sellers to:

Charge VAT at the point of sale
Avoid customs processing delays
Report all EU sales via a single VAT return

Learn more about IOSS

Reclaiming EU Import VAT

If you’re VAT-registered in the EU, import VAT can usually be deducted on your return. If you're not based in the EU, you may need:

A fiscal representative
An EU VAT refund scheme (8th or 13th Directive)

Import VAT in the UK: What’s Changed Post-Brexit

Union Jack flag waving on a pole outside a stone building in the UK.

How UK Import VAT Works

Since leaving the EU VAT area, the UK treats all inbound goods as imports—even from EU countries. Import VAT is charged on goods valued over £135, with special rules for lower-value shipments.

UK VAT Rates

The standard rate is 20%, with some goods eligible for reduced rates:

5% for items like domestic heating or car seats
0% for books, children's clothing, and certain food items

Check current UK VAT rates

Postponed VAT Accounting (PVA)

PVA allows UK VAT-registered businesses to:

Defer paying import VAT at the border
Declare and reclaim it in the same VAT return

This avoids the need for upfront cash and simplifies accounting.

Read our PVA guide

Low-Value Imports (≤£135)

For consignments worth £135 or less:

VAT is typically collected at point of sale
If the sale is through a marketplace, the platform is responsible for VAT collection

Who Pays Import VAT?

The importer of record (named consignee) is liable for the VAT
Businesses can apply for a duty deferment account with HMRC to delay payments

UK import VAT guidance from HMRC

Import VAT vs Import Duty: What’s the Difference?

Import VAT and import duties are often confused, but they serve different purposes and have different rules:

Import VAT is a consumption tax and is reclaimable by VAT-registered businesses.
Import duty is a customs tariff based on the type and origin of goods and is not reclaimable.
Duties are calculated using HS codes, trade agreements, and thresholds.
VAT is based on the customs value plus duties, then multiplied by the relevant VAT rate.

Even if import duties are reduced or exempt under a trade deal, VAT is still charged unless a specific exemption applies.

How to Manage Import VAT Effectively

Managing import VAT across multiple markets can be complex. Here's how to streamline your compliance:

Use VAT compliance software to automate calculations, filings, and recovery.
Implement PVA for UK imports to avoid upfront payments.
Register for IOSS to simplify EU low-value e-commerce shipments.
Keep accurate records of customs documents, invoices, and VAT numbers.

Explore Taxually’s automation tools

Summary

Import VAT continues to be a vital component of cross-border trade, balancing fair taxation and facilitating smooth commerce. Understanding key procedures—like IOSS in the EU and PVA in the UK—helps businesses manage costs, remain compliant, and protect cash flow.

Do you need help with your VAT compliance? Book a free call with one of our VAT experts to find bespoke solutions for your business, optimize your VAT costs, and reach millions of new potential customers.

Frequently Asked Questions

What is import VAT?

A tax on goods brought into the UK or EU from outside their VAT territories, charged at the local VAT rate.

When do I pay import VAT?

At the time goods enter the destination country—unless you use PVA (UK) or IOSS (EU).

Can I reclaim import VAT?

Yes, if you’re VAT-registered in the country of import and keep proper documentation.

What’s the difference between import VAT and duty?

VAT is reclaimable and applies to nearly all goods; duty is a tariff that varies by product and origin, and it is not reclaimable.

What if my goods are under the low-value threshold?

In the UK (£135) and EU (€150), VAT may be collected at the point of sale. If you’re not using IOSS or the correct procedure, customs may delay or reject the shipment.