Drug Products: Generate cash flow advantages on the import tax (VAT) by making use of a fiscal representative

Neither a non-EU nor an EU company that have a VAT registration can easily use the VAT transit rule when importing drug products. This means that VAT has to be paid on imports of goods from outside the EU. Of course, this VAT can be reclaimed via the next monthly or quarterly VAT declaration. However, this means a cash flow disadvantage because import VAT needs to be pre-financed. Thus companies located in non-EU countries (e.g. Switzerland, USA, South America, Russia, etc.) planning to

import their drug products into EU states should take into consideration to be represented by a fiscal representative for purposes of VAT (Value Added Tax). That saves these companies, which do not have their own offices in the EU (e.g. in Germany), the administrative effort of VAT registration and thus the associated declaration obligations. Fiscal representation in Germany is possible under Art. 22a Value Added Tax Act (UStG) for companies located abroad which conduct business in Germany exclusively free of VAT, and for which no input tax amounts can be deducted. The company based abroad most not have its domicile, its registered office, its top management or a branch office either in Germany. 

There are several options, goods imported from a third country and having as their final destination another EU country apart from Germany can be handled:


Option 1: Customs clearance is effected in Germany, whereby exemption from import VAT is applied for; after customs clearance, the goods are dispatched for delivery directly as tax-free intra-community supply to other EU countries


Option 2: Drug products in a first step are being transferred into an Inward Processing procedure (Aktives Veredelungsverfahren) in order to get executed the release for the EU market by a Qualified Person; subsequently the goods can be directly dispatched as tax-free intra-community deliveries to other EU countries or, alternatively, transferred into a Bonded Warehouse situation, waiting for

further treatment 

What are the functions of a fiscal representative?

The fiscal representative has to fulfil as its own obligations the obligations of the

company domiciled abroad, which the latter would have to fulfil pursuant to VAT



It submits a VAT declaration for the calendar year which summarizes the overall tax basis.

  1. The fiscal representative is also required to submit a Summary Report by the 10th day after expiry of a calendar year to the Federal Central Tax Office (Bundeszentralamt für Steuern), unless it has exemption in a certain situation.

  2. The fiscal representative is required to fulfil the general recording duties pursuant to Art. 22 UStG.

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Drug Products: Generate cash flow advantages on the import tax (VAT) by making use of a fiscal representative
by Glatt Pharmaceutical Services, Logistics
EU customs clearance,_cash flow advantag
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