A Guide to Import Taxes and their Acronyms

For ecommerce businesses, import taxes can represent a significant part of your overall expense in fulfilling overseas orders. Understanding how they function and their potential impacts on your operations is absolutely crucial.  

Here is a guide to import taxes and the many acronyms associated with customs fees, to help foster a better understanding for high-growth brands shipping internationally. 

What are Import Taxes? 

Import taxes are one type of customs fee applied to goods brought into a country from overseas. They act as a trade barrier, controlling the flow of specific types of goods into the country and giving an advantage to domestic goods over imports. Import taxes also provide revenue for the local government. 

Types of Import Taxes 

Import taxes take various forms. While an ecommerce brand may only deal with some, it’s vital to understand them all.

VAT (Value-Added Tax)   

VAT is a tax collected at each stage of the production and distribution process. It applies to the value added to a product or service by a business.  

The way VAT applies to imported goods is usually based on the cost, insurance, and freight (CIF) value. It’s important to consider these values when coming up with a pricing strategy for products being shipped internationally.

GST (Goods and Service Tax)  

Like VAT, GST is a tax enforced by many countries on the sales of goods and services. However, unlike VAT, GST is often charged at a single rate. Products exported to a country that imposes GST may be taxed at the border — it’s crucial to consider this when calculating potential import costs.