NFIA, helping your business bloom in Europe

NFIA, a Dutch government agency, can be of tremendous assistance in establishing or expanding your pan-European operation. For an overview of our free and confidential services, click About NFIA.  We'll help you discover how investing in setting up your business in the Netherlands pays you dividends all across Europe.

North American Companies in the Netherlands - investor testimonials

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NFIA New York 212-246-1434
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415-291-2060

Q&A: Logistics

With its centralized location, market proximity and highly developed logistics infrastructure, the Netherlands is often called 'The Gateway to Europe'. To learn more - click on a question for a quick link to the answer, or scroll down to read the entire section..

Q: Why is logistics important for my company's success in Europe?

Q: Where should I set up my European Distribution Center?

Q: Are there tax and customs advantages to importing my goods via the Netherlands?

Q: When I start doing business in Europe, should I set up my own distribution center or can I find a partner who can do this for me?

Q: Which services can I outsource to a logistics service provider?

Q: How can I identify a suitable logistics service provider (LSP)?

Q: What is Value-Added Tax (VAT) and how does it work?

Q: Can a Logistics Service Provider (LSP) act as my fiscal representative?

Q: What is the VAT deferment system?

Q: Do I need to register for Value-Added Tax (VAT)?

Q: What are Customs duties and how do they work?

Q: What are the advantages of having a bonded warehouse?

Q: How can I find out if I have to pay customs duties and VAT for my product, and what the exact tariff is?


Q: Why is logistics important for my company's success in Europe?

To become successful in the European market, offering the right product for the right price is just not enough anymore. If your company plans to compete with the existing players in the market, you must do it at the right place, in the right time, and in the right configuration. So, it's essential to set-up an effective and efficient supply chain, tailored to the unique characteristics of your products, service levels and markets.

There are, of course, many ways to set up your European supply chain. However, one of the most common is the centralized European distribution model, in which your entire European supply chain is managed from one central point in Europe.

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Q: Where should I set up my European Distribution Center? 

One of the crucial aspects in designing your European supply chain is selecting the right location for your European Distribution Center. Location factors such as air and sea port capacity, quality of the transport infrastructure, availability of logistics services, employment and real estate are obviously important. But don't forget to consider customs regulations and the tax environment as well. The Netherlands is an ideal location from which to serve the European market. In fact, more than 50% of all international companies using a Centralized European Distribution Center located it in the Netherlands.

The Dutch trading history goes back many centuries, so there's a long-established tradition in transport and logistics. Unique characteristics of the Netherlands include:

  • Central location within the European market
  • Excellent sea and airport facilities
  • Extensive transport infrastructure with fast connections
  • Excellent and well-developed logistics industry
  • Internationally-oriented business community

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Q: Are there tax and customs advantages to importing my goods via the Netherlands? 

Since foreign trade and investments contribute significantly to the Dutch economy, the Dutch government works hard to create an attractive business climate for foreign companies. It aims to facilitate doing business via the Netherlands through cooperation and flexibility, as well as streamlined customs procedures that quickly validate documents. Bureaucratic red tape and customs checks have been replaced by streamlined administrative controls. Examples of this are:

Customs bonded warehousing

Theoretically, customs duties are due when goods are imported into the European Union (EU). But the Netherlands allows the payment of these duties to be postponed through the storage of the goods in a customs bonded warehouse. Only when the goods are shipped out of the warehouse does the company pay the import duties. This can result in considerable cash-flow advantages.

VAT deferment system

In contrast to most other EU member states, the Netherlands has instituted a system that provides for the deferment of VAT at the time of import. Instead of paying VAT when the goods are imported into free circulation within the EU, the payment can be deferred to a periodic VAT return. Under this system, the VAT at import should be declared but the amount can be deducted on the same return. The bottom line is that there is no actual payment of VAT at import, so that you can realize cash-flow and interest earning benefits.

Highly automated customs procedures

Dutch Customs makes use of computerized clearance systems that speed up the flow of cargo. Also, as a result of unified and standardized documentation across the EU, approval time is minimized and costly delays are eliminated.

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Q: When I start doing business in Europe, should I set up my own distribution center or can I find a partner who can do this for me?

The choice between outsourcing and setting up your own logistics operation depends on various issues: Is logistics a core or strategic activity? What would be the type and scale of the operation? What is the required time-to-market, and how much logistics knowledge is available in the company? However - especially for companies starting to do business in Europe for the first time - outsourcing the logistics operation to a local logistics service provider (LSP) can offer considerable advantages. Some of these advantages include:

  • No capital investments needed - fewer risks
  • Lower total logistics costs
  • Flexibility in space and manpower
  • Economies of scale
  • Insight into logistics costs
  • Concentration on core business
  • Flexibility in supply chain set-up

In Europe outsourcing logistics activities to logistics service providers (LSP's) is more common than in the US and Canada. Of all operations, about 65% is outsourced worldwide, but in the Netherlands this percentage is an even higher 75%. The reason is the high volume of goods flowing via the Netherlands. This makes it profitable for LSP's to offer warehousing, transportation services and value added services. The advantages for your company are that the rates are competitive, and there are frequent connections to pan-European destinations.

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Q: Which services can I outsource to a logistics service provider?

Companies in the logistics industry here offer a wide variety of services to clients. 'Standard' services offered include:

  • Freight forwarding from all over the world to Europe
  • Customs clearance
  • Storage
  • Order-receiving and preparation
  • Value-added services such as final assembly, labeling, kitting, fiscal representation
  • Transportation throughout Europe
  • Management information

The logistics service provider can also assist you in optimizing your supply chain, which can save on costs and improve lead-times.

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Q: How can I identify a suitable logistics service provider (LSP)?

If you decide to outsource your European logistics operation, the next challenge is to find the LSP that best meets your needs. While there are plenty of logistics services providers, all with their own fields of expertise, it can be quite difficult to determine exactly the one that will suit you best. The Holland International Distribution Council (NDL/HIDC) can help you find the best logistics partner.

NDL/HIDC is a private, non-profit organization representing approximately 500 companies and organizations in the logistics industry in the Netherlands. Based on years of experience and in-depth knowledge of the European logistics scene, NDL/HIDC supplies tailor-made advice and match-making services to foreign companies that are entering the European market for the first time, or that are expanding or re-engineering their European logistics operations. All members of NDL/HIDC have strong track records in their respective fields, enabling the organization to identify the most suitable logistics service providers for every inquiry. All advisory services are free of charge, totally confidential and without any obligation. NDL/HIDC's matchmaking process consists of three steps:

  • Defining logistics requirements
  • Preparing a selection of network partners
  • Arranging fact finding trips to selected logistics service providers

If you are interested in NDL/HIDC's services, please download and fill out this logistics questionaire and return it by email.

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Q: What is Value-Added Tax (VAT) and how does it work?

Value Added Tax, or VAT, is used in all European Union states and in many other nations around the world, including your neighbor to the north, Canada. VAT, as its name suggests, is a tax on the value added by each producer in the economy.

For an example on how VAT works, look at Figure 1, which lists some hypothetical data on the cost of producing a wooden baseball bat. In the first step of the process, a logger cuts down a tree and sells enough wood to a sawmill to make one baseball bat for $4. The sawmill cuts the logger's tree into lumber, selling enough lumber to make one bat to the bat manufacturer for $7. The bat maker then makes the bat and sells it for $15 to a sporting goods store, which sells it to a customer for $25.

Figure 1:  Example of Value-Added Tax

 

Goods Price $ Value Added 10% VAT
Logger's Wood 4 4 0.40
Sawmill's lumber 7 3 0.30
Bat Maker's bat 15 8 0.80
Sports Store's bat 25 10 1.00
Totals   25 2.50

 

If a 10% VAT is in effect, each producer is required to pay a tax on 10% of the value added to the final product. In this case, the logger who cuts the tree pays VAT of 40 cents on the wood used to make one baseball bat because the logger's wood contributes $4 to the value of the product. The sawmill buys the wood for $4 and, after cutting it up, sells the lumber to make the bat for $7, meaning that it adds $3 in value to the product. So the sawmill owes 30 cents in value-added tax. The bat maker takes a $7 piece of lumber and makes it into a $15 bat, adding $8 in value to the bat in the process and paying 80 cents in value-added tax. The retailer who sells the bat for $25 adds $10 in value to the bat by making it conveniently available to the customer and so owes $1 in value added tax. The total VAT paid is $2.50, or 10 percent of the retail price of the goods. As you can see, the total VAT collected is the same as would be obtained with a retail sales tax of the same percentage.

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Q: Can a Logistics Service Provider (LSP) act as my fiscal representative?

Many European customs brokers and forwarders offer Fiscal Representation for VAT ("VAT-Rep") as a service to their customers. In the Netherlands, a VAT-Rep can obtain permission to defer Import VAT, usually due upon import, to the periodic return it must file for its client. As Import VAT may be set off in that periodic return, nil Import VAT is cash payable for imports when using this "Article 23" deferral-license. Not all EU member countries offer this deferral option.

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Q: What is the VAT deferment system?

The paying of the VAT can be moved from the time of import to when the company declares taxes, usually monthly. The VAT due for the import will be mentioned at the declaration as payable, while at the same time, amounts will be subtracted as pre-paid taxes. To obtain this deferment, the importer must apply for a license at the tax department under "Article 23." The amount of import declared each month must also remain constant, and bookkeeping must meet specific requirements.

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Q: Do I need to register for Value-Added Tax (VAT)?

A company without an establishment in the Netherlands can appoint a fiscal representative. A fiscal representative works for a foreign company and deals with all its VAT obligations (VAT declarations, listing and the paying of VAT). There are two types of fiscal representatives, limited and general.

The limited fiscal representative

A limited fiscal representative acts on behalf of a foreign company to import the goods and make the subsequent deliveries. This means importing from outside the EU to a customer in the Netherlands or another member country.

The general fiscal representative

The general fiscal representative acts on behalf of a foreign company for all deliveries for which tax must be paid, the intra communal acquisition, and the import.

For both types of fiscal representative, a license is needed as well as a customer's statement officially appointing the fiscal representative.

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Q: What are Customs duties and how do they work?

Calculating duty is a complex undertaking. Essentially, the duty calculation will consist of the invoice value, plus freight charges to the EU frontier, plus insurance premium and any uplifts on such values as required by Customs. There are also special rules when royalties on tools and dyes, etc. are provided or payable by the importer. Customs is basically looking to find a "fair market value" for the goods when valued at the EU frontier. The rate of duty may then be taken from the tariff, allowing for any special preferences, quotas or other reduced duty rates involved.

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Q: What are the advantages of having a bonded warehouse?

Normally, when goods are imported into the free circulation of the European Union, Value Added Tax (VAT) and customs duties should be paid before the goods can be stored, waiting to be sold.

However, it is also possible to store the goods in a customs bonded warehouse, which results in a postponement for an indefinite period of customs duty/VAT at import. In this case, customs duties and VAT at import only need to be paid when the goods are actually imported into the free circulation of the EU.

If the client is located in a non-EU country, the goods can be transported under customs bond from the warehouse to the country where the buyer is located. Then, customs duties and VAT at import are subsequently paid in the country of destination.

Because the majority of the customs bonded warehouses in the Netherlands are administratively controlled, the number of physical checks by the Customs Department is reduced dramatically.

For example, the import can be carried out via EDI or via a diskette. Supplying customs with information this way allows them to do more detailed checks on the clearances as well as the mutations of the inventory. Physical checks are carried out at random and basically each logistics service provider is checked extensively only once every three years.

Under this type of scenario, it is possible to operate a European Distribution Center 24 hours a day, 7 days a week, 365 days a year.

While foreign companies can apply for a license to operate their own customs bonded warehouse, many companies outsource this type of storage to a logistics service provider.

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Q: How can I find out if I have to pay customs duties and VAT for my product, and what the exact tariff is?

Binding Tariff Information (BTI)

The Binding Tariff Information (BTI) is a EU-wide system designed to allow economic operators and traders to understand the proper classification of goods in the tariff and correct statistical nomenclature.

The BTI, which is generally in effect for six-year periods, provides legal guarantees to traders; ensures uniform application of appropriate nomenclature; allows duty rates to be established at import; and facilitates the use of import/export or advance fixing-certificates, calculation of export refunds, etc.

To obtain the BTI for your goods click here.

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