Value Added Tax (VAT) is a consumption tax collected at each stage of a product’s production and distribution chain, with each business in the chain collecting tax on the value they add. Unlike a simple sales tax that is collected only at the final point of sale, VAT is collected incrementally — each business pays VAT on its inputs and charges VAT on its outputs, remitting the net amount to the tax authority. VAT is the primary consumption tax system in the European Union, UK, Canada (GST/HST), and many other countries worldwide.

VAT in International Shipping

For companies shipping goods into VAT countries, import VAT applies at the point of customs clearance — typically calculated as a percentage of the goods’ customs value plus any applicable import duties. In the EU, import VAT rates range from 17–27% depending on country. VAT-registered businesses can usually reclaim the import VAT they pay on business inputs, but non-registered importers (consumers, non-VAT-registered businesses) cannot. Since July 2021, the EU’s Import One-Stop Shop (IOSS) system allows e-commerce sellers to collect and remit VAT at point of sale for low-value (under €150) consumer shipments, simplifying cross-border B2C logistics.