How Does Customs and Excise Work?

Whatever you buy in your own country is taxed. From groceries to consumer electronics, cars to homes, there are fees you pay to the government. There are federal taxes and state taxes. At times, the taxes are not explicitly called so but they are in the form of registration charges, mutation fees and many other terms are used but they all basically mean the same thing.

When you are sending something overseas or to another country, you are not liable to pay any state or federal taxes as an individual or business. A company based in the United States is not liable to pay any sales tax or service tax to the government of Germany. But when something is sent to German consumers or personally to someone in Germany, the government will charge customs and excise duty.

While taxes and charges vary from one country to another, most countries have sales tax, value added tax, customs duty and excise duty. Sales tax or value added tax is mostly applied for goods sold domestically. At times, goods sent through international courier services are also levied a value added tax or VAT. Most developed countries have goods and services tax or GST as the standard tax that all registered companies pay. Foreign companies or their goods sent through courier to Germany will not be charged such duties. Instead, the sender or the recipient will pay customs duty and excise duty.

The customs and excise duties depend on the nature of the item being sent, the value of the item and the prevailing laws pertaining to those items.

For instance, the European Union charges VAT for items being sent from non-EU countries. The VAT is applicable for gifts worth more than £36, other goods worth more than £15 and alcohol, tobacco products and fragrances of any value. VAT is charged on the total value of the price paid for the goods, postage, packaging and insurance along with any duty you owe.

Customs duty is charged on all goods including gifts should they be of a certain value. The customs duty in EU has to be in excess of £9. Typically, you don’t pay anything if the worth of goods is less than £135. Gifts worth £135 – £630     will incur a 2.5% customs duty. Excise duty is charged for alcohol and tobacco products.

Items sent from member nations of EU through international courier services often have excise or customs duty paid prior to dispatch.