Overview
When selling physical goods across international borders, it is essential to understand the tax obligations required to ensure compliance with regulations in various global jurisdictions. When shipping goods internationally, sellers must consider the following key points:
- Party responsible for paying import taxes and duties — Depending on the shipping terms, either the seller or the customer may be responsible for VAT, GST, and customs duties when goods cross borders.
- Where VAT is calculated — Unlike domestic sales, where tax is typically calculated at the point of sale, cross-border transactions may require tax payment at customs clearance in the destination country.
- Seller's compliance obligations — Some jurisdictions require sellers to register for VAT/GST even for cross-border sales, while others place the burden entirely on the buyer or impose simplified import schemes.
In addition, it's important to understand the Incoterms® applicable to your cross-border sales. Incoterms® (International Commercial Terms) are the standardized trade terms that define the responsibilities of parties involved in international trade, including shipping costs, insurance, and import taxes/duties. The two most relevant for e-commerce sellers using Anrok are:
- Delivered at Place (DAP) — In this arrangement, the customer is responsible for import clearance, including paying any applicable duties and VAT. This is common in B2B cross-border sales, where third-party logistics providers may handle duties and VAT at the customs border.
- Delivered Duty Paid (DDP) — In this arrangement, the seller is responsible for paying all associated costs, including transportation, import duties, and VAT. This is typically calculated at checkout and charged to the customers, and is common in B2C cross-border sales.
Anrok currently supports B2B cross-border sales for physical goods only. It assumes that sales are Delivered at Place (DAP) and will not apply tax or duties to such sales. However, for sales to the US, Anrok will apply sales tax but not duties, as sales tax is not paid at the border. Anrok does not support B2C cross-border sales, since Anrok does not handle duties. When Anrok receives B2C cross-border sales, these transactions will encounter a Product tax category not supported for jurisdiction error on your Unprocessed transactions page. Anrok assumes that sales of products are Delivered-Duty-Paid (DDP). However, there is an exception for sales to the US. In such cases, Anrok will apply sales tax but not duties, since sales tax is not paid at the border.