Swedish Import VAT – Is Swedish Customs the competent authority?

The Supreme Administrative Court of Sweden has recently ruled in a case about how customs debt incurred due to the failure to comply with customs legislation is to be calculated when the goods are subject to exemption from custom duties because of preferential tariff measures.

In this matter, a Turkish company, the holder of an A.TR certificate, transported goods from Turkey to Sweden through a transit movement procedure. The goods were transported directly to the importer, a Swedish company, without being presented at Swedish customs. After an enquiry by Swedish customs, a customs representative lodged a customs declaration on behalf of the Swedish company. As the goods had been removed from customs supervision, a customs debt was incurred for non-compliance with the customs legislation, and the Turkish company was appointed as the debtor.

According to Article 86(6) of the Union Customs Code, when goods are relieved from customs duty due to, among other things, a preferential tariff measure, the same preferential treatment should also be applied on a customs debt incurred through non-compliance under Article 79. This provided that the circumstances that led to the occurrence of the customs debt was not an attempt at deception. The Supreme Administrative Court held that the A.TR certificate provided by the Turkish company constituted a preferential tariff measure in accordance with Article 56(2)(d). Since there was no reason to question the A.TR certificate or that the failure that led the incurrence of a customs debt was a mistake, the Supreme Administrative Court set the customs debt to SEK 0.

Swedish customs have since stated that the case solely concerns the application of Article 86(6) in relation to Article 56(2) points (d) to (g) of the UCC, and not the rest of the provisions referred to in Article 86(6). This interpretation entails that the judgment cannot be advisory in calculating import customs in matters with other circumstances, for example other procedures like inward and outward processing.

The Supreme Administrative Court also ruled concerning VAT. According to the Swedish VAT and customs legislation, VAT is not to be imposed by Swedish customs if the declarant is registered for VAT at the time of the customs decision. In this case a customs representative had filed a declaration on behalf of the transporter after the goods had been removed from customs supervision, but before Swedish customs had decided in the matter. The Supreme Administrative Court found that there was a declarant at the time of the decision, and that the Swedish Tax Agency was the correct tax authority for the VAT, not Swedish customs.

Prior to this ruling, Swedish customs has habitually appointed the holder of the procedure (normally the transporter) as the debtor and the person liable for import VAT duty, i.e. not the real importer. As such goods were not transported for the sake of the transporter’s business, a deduction of the import VAT was denied. Thus, the import VAT was a cost for the transporter, with normally no opportunity for the transporter to be compensated by the customer.

The decision is welcomed and will have a big impact in cases of failure to comply with the customs legislation, as the companies who have failed to comply but who have notified Swedish customs about the mistake can, in some cases, be relieved of the locking effects related to import VAT.

Read the WTS Global Customs Newsletter here.