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

In short: Import VAT is a tax charged on goods brought into the UK or EU from outside their VAT areas. It is based on the customs value plus duty. VAT-registered businesses can usually reclaim it. In the UK, Postponed VAT Accounting lets you avoid paying it upfront. In the EU, IOSS covers low-value goods.

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

But the rules, relief schemes and accounting methods differ a lot depending on where your goods are going. 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

What Is Import VAT?

Import VAT is a tax charged on physical goods imported into the UK or EU from non-VAT territories. Its purpose is to treat foreign goods the same as domestic ones for tax purposes. This stops imports from gaining an unfair price advantage.

The core idea of import VAT is the same in the UK and EU. But how it is applied, calculated and reclaimed differs a lot. It depends on your location, the value of your goods and the type of transaction.

How Does Import VAT Work in the EU?

EU import VAT is charged when goods enter the EU from a non-EU country. It is calculated on the customs value plus duty. Low-value goods can be handled through IOSS instead.

When Does EU Import VAT Apply?

Import VAT in the EU applies when:

• Goods enter the EU from a non-EU country (e.g. China, UK, USA)
• Goods of any value are imported. For shipments up to €150, the seller can use IOSS to charge VAT at the point of sale instead
• The buyer is located in the EU’s VAT zone

How Is EU Import VAT Calculated?

EU import VAT is calculated 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 is: 

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. IOSS 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

How Do You Reclaim EU Import VAT?

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

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

How Does Import VAT Work in the UK Post-Brexit?

Since Brexit, UK import VAT applies to goods valued over £135 coming in from abroad, including from EU countries. VAT-registered businesses can use Postponed VAT Accounting to avoid paying it at the border. You can also read VAT Northern Ireland: How the System Works Post-Brexit.

How UK Import VAT Works

Since leaving the EU VAT area, the UK treats all incoming goods as imports, even from EU countries. Import VAT is charged on goods valued over £135. Special rules apply to lower-value shipments.

What Are the UK VAT Rates?

The standard UK VAT 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

What Is Postponed VAT Accounting (PVA)?

Postponed VAT Accounting (PVA) allows UK VAT-registered businesses to:

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

This removes the need for upfront cash and makes accounting simpler.

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 is a reclaimable consumption tax, while import duty is a customs tariff that you cannot reclaim. The two are often confused, but they serve different purposes and follow 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 Can You Manage Import VAT Effectively?

You can manage import VAT by automating it with software, using PVA and IOSS, and keeping good records. Managing import VAT across several 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 remains a vital part of cross-border trade. It balances fair taxation with smooth commerce. Knowing key procedures, like IOSS in the EU and PVA in the UK, helps businesses manage costs, stay 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.

Further reading

What is a Sales Tax Exemption Certificate?

Everything You Need to Know About IOSS

Do I Charge VAT to EU Customers Post-Brexit?

Taxually’s VAT Compliance Software

How Taxually handles this

Taxually’s CrossTax handles VAT registration, VAT, OSS and IOSS returns and fiscal representation in the countries you sell into, and checks your sales data against 250+ validation rules before each filing. OneTax then pays every tax authority with one bulk payment in your chosen currency.

Related guides

• What Are VAT Margin Schemes and Am I Eligible?
• Understanding HMRC VAT Invoice Requirements in the UK
• Becoming UK VAT Registered: A Guide for Businesses