How to handle import duty tax?

I import goods from China and would like to know how to input the Import Tax Duty from the shipping agents invoice into my business accounts ?

I guess it is shown as a liability but i am not sure ?

The VAT i have already done using the VAT box in “Purchase Invoice” and this is shown as a liability on the summary page which is correct.

Have a look at related question that discusses Australia. The principle is the same though:

Reading the post relating to Import of goods into Australia, it looks like i will have to make a tax code of 100% for the import duty and log this in separate as the actual Import Duty cost into the Purchase Invoice section.

This should then put the import tax into the liabilities section of the account summary and appear on the balance sheet.

Can you give specific example with amounts and tax rates of what you are trying to record? What I’m almost certain about is that custom tax code with 100% tax rate is not the way to go.

£7500.00 goods value is imported to me from USA.

Yes import duty of 5% needs to be recorded as well as 20% VAT when i enter the information into PURCHASE INVOICE for expenses.
The tax should be recorded as a liability i believe?

You will get separate invoice for VAT and import duty right?

Yes that is correct.

OK, so when you receive an invoice from supplier, they are not charging you VAT so you enter purchase invoice or simple spend money transaction but don’t use VAT code because supplier is not charging you VAT.

So far so good right?

Then you will receive separate bill charging you VAT and import duty tax. So on £7,500.00, 20% VAT is £1,500 and 5% import duty tax is on £375.00. Therefore you will receive a bill of £1,875.00 right?

Now here is an example of how to record this bill correctly:

Notice how first line is -7,500 and no tax code is used. This is to reverse purchase created by original transaction. Then next line is 9,000, this is new purchase price which includes VAT 20% and finally the last line accounts for import duty tax 375.00 coming to total of 1,875.00

Yes thank you for the diagram, this is what i thought, you have to break down the transaction into different parts.

Do you post the Import Duty as a “Liability” , as it is a tax amount?

Import duty tax is Expense account.

Thank you Lubos.

I am glad you have pointed this out as most people would think that all Duty and Taxes are classed as Liabilities.

Hello All;
sorry to reopen this subject, but have question here, will explain by Example.
am importing Goods,( which will be stored in Inventory for resale).
as mentioned above, goods value will have two Tax, Customs duty and Import VAT.
Customs duty is paid at clearance time, and will be paid against clearance agent or directly to customs authority,
Import VAT will be paid via reconciliation with TAX authority,
my Question,
Customs Paid shouldn’t be reflected in Inventory items, not as just expenses, since customs duty is adding cost to the items, which shall be counted based on sold quantity not just one time payment amount ?


Unsure what your question is but perhaps the above statement can be re-written as:
Customs Paid should be reflected in Inventory items, not as expenses, since customs duty is adding cost to the Inventory items, which shall be counted based on purchase quantity and not as a one time payment.

Have you read the Freight-in Guide

Thanks @Brucanna no actually just read now. this will help if same currency of tax and goods,
however, i make the services of tax, and clearence as inventory items, with zero Qty and it do the same

you got my point despite miss expression :slight_smile:

It doesn’t have to be same currency, you can add taxes in currency 1 to suppliers purchase invoice in currency 2 by converting the taxes using an exchange rate and adding as Freight-in to the purchase invoice.

Read through this lengthy but worked solution topic Importing of goods

But this wont add / spread those costs over the actual inventory items involved as requested:
“Customs paid should be reflected in Inventory items since customs duty is adding cost to the Inventory items”

Besides, as you will never sell “tax” or “clearance”, those inventory items will never decrease in value unless you journalise them to P&L expenses.

I just read all responses concerning import duty. I do understand that I have to add to the cost of buying my goods to have my final sales value. My question is say I paid for import duty straight to the authories through my bank how do I count for that payment on my statement? Do I create a customs duty expense?

Treat customs duties as freight-in charges. Read the Guide:

Hi @lubos I am new here, and I am a little bit confused. I am importing goods from Asia and when those goods arrive at my country, I have to pay 15% over the CIF amount as a customs tax, which goes to the cost of the goods, then custom authorities charge me another 15% as a sales tax paid in advance, I am supposed to charge that last 15% to my customer when I sell to them and decrease it from the amount already paid. Both taxes come in the same bill from the customs authorities. The thing is, I don’t know how to allocate in the system, the customs tax to the cost of the goods, and the sales tax paid in advance to the proper tax account. Here is an example: Amount invoiced by the supplier $7,000.00, freight plus insurance $3,000.00 so CIF= $10,000.00; Customs tax= $1,500.00, Sales tax paid in advance ($11,500.00 x 15%) = $1,725.00; tax bill sent by customs authorities $3,225.00. I’ve read so many threads and tried some of the things there, but I’m still confused. I hope I’ve made myself clear, can you please guide me?

@wmartinez have a read of this topic Importing of goods

In essence, from the customs authorities invoice the 15% customs tax goes to a clearing account and gets back added to the suppliers invoice as freight-in whereas the Sales Tax gets posted to the Tax Payable account…

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Thanks @Brucanna for your reply! I will take a good look to that thread and come back to you :blush: