Over the past years, especially during discussions within the Trump administration, European VAT (Value Added Tax) has occasionally been portrayed as a trade barrier—an additional cost imposed on US businesses exporting goods to Europe. This perspective, however, is based on a misunderstanding of how the European VAT system actually works.
Let’s set the record straight: VAT is not a tariff. It is a consumption tax that, when correctly handled, does not burden businesses—including those based in the United States.
How VAT Works for US Companies
VAT is levied at the point of import in all EU Member States and many other European countries. That means when a US-based company imports goods into Europe, it must pay VAT at the border. This might look like a cost at first glance, but there’s a critical catch:
That VAT is fully recoverable—provided the company follows the correct procedures.
In practice, this means:
• The US company must register for VAT in the country of importation;
• The company must file periodic VAT returns;
• The company must account for both the import VAT and the local sales or intra-community supplies that follow.
Once registered and compliant, the import VAT can be reclaimed as input VAT on the same VAT return. Result: no lasting cost, no margin erosion, no tariff.
No VAT Prepayment Required in Certain Countries
There’s more good news. In some European countries—most notably the Netherlands—it’s possible to avoid even the upfront payment of import VAT.
How? By appointing a VAT fiscal representative, who can apply for a special import VAT deferment license from the Dutch tax authorities. With this license:
• VAT on imported goods is not paid at the border;
• Instead, the VAT is reported on the regular VAT return;
• It can be deducted immediately on the same return as input tax.
This structure effectively eliminates any cash-flow disadvantage, making the import process into the Netherlands particularly attractive for non-EU businesses.
The VAT Burden Belongs to the Consumer—Not the Business
The bottom line is this: European VAT is a neutral tax. The system is specifically designed so that only the end consumer—the person buying the goods at the end of the supply chain—bears the tax.
US-based companies that treat VAT as a tariff or a business cost are missing a fundamental aspect of how the system works—and may be incurring unnecessary costs or inefficiencies by not setting up their operations correctly.
What US Businesses Should Do
If you’re a US-based company exporting to or expanding into Europe:
• Don’t fear the VAT.
• Don’t treat it as a tariff.
• Do seek qualified advice.
A knowledgeable VAT advisor can help you:
• Determine the best country for import;
• Set up efficient VAT registration and reporting structures;
• Navigate local requirements, including fiscal representation where needed.
With proper planning, European VAT becomes a non-issue—a procedural step, not a financial burden.
Conclusion
The key message is simple:
European VAT is not a tariff—it’s a recoverable, neutral tax that should never hit your bottom line.
All it takes is good guidance, proper setup, and compliance. And that can be arranged.
