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Import taxes 

Learn about import tax and how Zonos calculates it for you.

Import taxes are taxes placed on international purchases but do not necessarily match domestic taxes. Import taxes can vary by country, region, HS code, and de minimis value. Every country has a unique country-level tax rate. Some countries have a general consumption tax, typically referred to as value-added tax (VAT) and occasionally as goods and services tax (GST). The way these taxes are calculated varies by country.

Calculate import taxes with Zonos Landed Cost 

The Zonos tax calculation effectively applies tax formulas according to the desired import country regulations and tax de minimis.

To learn more about import taxes, read our total landed cost guide.

As shown in the landed cost object below, the tax rates are returned in an array with a type specifying which product or service the tax is applied to.

Landed cost

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{
    "id": "ldct_1Ce6vt2eZvKYlo2CrgzPqxaz",
    "amount_subtotal": {
        "duties": 0.00,
        "fees": 48.75,
        "taxes": 32.50
    },
    "taxes": [
        {
            "amount": 30.00,
            "description": "VAT",
            "formula": "10%",
            "item_id": "294395",
            "note": null,
            "type": "item"
        },
        {
            "amount": 2.50,
            "description": "VAT",
            "formula": "10%",
            "item_id": null,
            "note": null,
            "type": "shipping"
        }
    ]
}

Requirements for an import tax calculation 

To receive a landed cost calculation with tax and duty rates, a frequently used six-digit harmonized system (HS) code is required. You can input your own in your account setup; otherwise, a default HS code will be used.

De minimis tax 

The import tax de minimis qualification is returned in the LANDED COST OBJECT. If "threshold": "below" is returned, there is no tax on the import.

Some goods (e.g. wine) may not be eligible for de minimis consideration. If the good is ineligible, the note field will put out a response of null.

Landed cost

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{
    "id": "ldct_1Ce6vt2eZvKYlo2CrgzPqxaz",
    "amount_subtotal": {
        "duties": 0,
        "fees": 0,
        "taxes": 0
    },
    "de_minimis": [
        {
            "formula": "Less than 22 EUR",
            "method": "cifd",
            "note": null,
            "threshold": "below",
            "type": "tax"
        }
    ]
}

Checkout, Quoter, and Hello inform the shopper when their order is under the tax de minimis.

Correctly calculating import tax based on the de minimis value can have a significant impact on ecommerce conversion because it’s possible that the import will not incur duties or taxes due to the de minimis threshold, resulting in a lower landed cost and higher conversion rate.

If you want to learn more about de minimis values, read our de minimis values guide.

How import taxes calculated 

The most common valuation method for taxes is “cost insurance freight” (CIF), where taxes are applied to the value of the item, insurance, freight, duty, and fees.

Some countries may only apply taxes to the item and duty, offering a simpler tax calculation; others have their own formula for calculating the import’s taxable value. For example, Brazil uses the gross amount plus taxes, then charges their tax (ICMS) on that value. What appears to be an 18% tax into Brazil usually calculates out closer to 22% when compared to the valuation method in other countries. See different valuation methods below.

The method inside the de_minimis array will provide the Incoterm used for the tax calculation. For example, VAT is typically applied to CIF. These methods and their corresponding Incoterms result in a grand total that includes the taxes to be applied.

MethodTax is applied to
cifCost + Insurance + Freight
cifdCost + Insurance + Freight + Duty
cifdtCost + Insurance + Freight + Duty + Tax
fobCost of the goods
fobdCost of the goods + Duty

Import taxes on items for resale 

Oftentimes, resale items will not have a regional tax rate applied if the commercial invoice specifies that the item is for resale. This is common for an exporter selling to another business (business-to-business, or B2B). If the goods are later resold in the destination country and the importer is registered to pay taxes to their respective local government agency, the goods may not have the tax applied at the time of import. Common examples of this are businesses that import into Canada and Australia.

By default, all Zonos Landed Cost calculations are assumed to be not for resale (NFR). If your business needs a landed cost calculation without certain taxes applied, you can pass for_resale in the sale_type attribute in the landed cost request. This will return only the taxes that are applicable on an order for resale.

Landed cost

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{
    "id": "ldct_1Ce6vt2eZvKYlo2CrgzPqxaz",
    "amount_subtotal": {
        "duties": 0,
        "fees": 21.00,
        "taxes": 3.75
    },
    "taxes": [
        {
            "amount": 3.75,
            "description": "(GST) Goods and Services Tax",
            "formula": "5%",
            "item_id": "294395",
            "note": null,
            "type": "item"
        }
    ]
}

When using Checkout, Quoter, or Hello, a custom configuration will be required if you want to exclude tax calculations from the landed cost for resale items.

Reach out to Zonos to get a quote to enable landed cost calculations on orders for resale.

Import tax thresholds 

Certain laws, e.g. Australia GST on low-value imported goods, can impact a tax calculation even when it falls under a de minimis value. The new Australian law does not change the de minimis value of 1,000 AUD; however, the law shifts the responsibility of GST collection and remittance to the seller vs. the receiver, even if they are located outside of Australia. This law is based on turnover, which requires the U.S. retailer to register for GST and remit if their annual sales turnover exceeds 75,000 AUD.

When the retailer adds their registered GST number to their Zonos account, Zonos will measure and notify retailers of thresholds as well as automatically calculate the 10% GST in Australia on shipments under the de minimis tax rate. New Zealand has enacted a similar law.

In this case, the landed cost object will look slightly different because the item is under the tax de minimis but is still taxable. They may look like they conflict, but both are actually true.

Landed cost

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{
    "id": "ldct_1Ce6vt2eZvKYlo2CrgzPqxaz",
    "amount_subtotal": {
        "duties": 0,
        "fees": 0,
        "taxes": 15.00
    },
    "de_minimis": [
        {
            "formula": "Less than 1000 AUD",
            "method": "cif",
            "note": null,
            "threshold": "below",
            "type": "tax"
        }
    ],
    "taxes": [
        {
            "amount": 10.00,
            "description": "(GST) Goods and Services Tax",
            "formula": "10%",
            "item_id": "294395",
            "note": null,
            "type": "item"
        },
        {
            "amount": 5.00,
            "description": "(GST) Goods and Services Tax",
            "formula": "10%",
            "item_id": "635235",
            "note": null,
            "type": "item"
        }
    ]
}

Other tax rates 

Some countries apply other taxes or fees, e.g. the MPI biosecurity system entry levy in New Zealand or the Compensation Cess/Social Welfare Surcharge in India.

Tax quotes are broken out by their tax type and allow for a detailed summary of the tax.

Next steps 

Congratulations! You are ready to get a total landed cost quote with any Zonos product. Next, you may want to learn how to improve duty calculation of the landed cost or understand other landed cost factors.

  • Import duty- How does Zonos calculate import duty?
  • Zonos Landed Cost - Get an overview of the Zonos Landed Cost product and how it works.
  • Landed Cost API - Dive into our API docs for our Landed Cost product.

FAQ 

What is the definition of import tax?

Import taxes are taxes placed on international purchases that vary by country, region, and HS code. Every country has a unique country-level tax rate and de minimis value.

How do you calculate import tax?

The most common valuation method for taxes is CIF, where taxes are applied to the value of the item, insurance, freight, duty, and fees. Other methods include CIFD, CIFDT, FOB, and FOBD.

What does CIF, CIFD, CIFDT mean in international shipping?

These are valuation methods for calculating import taxes. CIF = Cost + Insurance + Freight, CIFD = Cost + Insurance + Freight + Duty, and CIFDT = Cost + Insurance + Freight + Duty + Tax. In other words, the CIF valuation method means that tax is calculated on cost, insurance, and freight.

What does FOB or FOBD mean in international shipping?

These are valuation methods for calculating import taxes. FOB = Cost of the goods, FOBD = Cost of the goods + Duty. In other words, the FOB valuation method means that tax is calculated on only the cost of the goods sold, where FOBD also taxes the duty.

Are import taxes applied to every order?

Not necessarily. It is very common for low-value shipments to be below the de minimis tax, and in that case, tax is not applied to the import.

Do I need to pay import taxes on items that are for resale?

Oftentimes when selling B2B, the importer will not have to pay import taxes if they are registered to pay taxes to their respective local government agency. Taxes will be collected when the items are resold. This is on a per-country basis. For example, two countries that allow tax-free B2B imports are Canada and Australia.

What if I don't have HS codes but want them so I can get the most accurate duty and tax quotes?

Zonos Classify can be used for on-demand HS code classifications. Harmonize your product catalog with advanced image recognition, universal product code (UPC) code lookup, and HS country code support.

How accurate are Zonos' import tax calculations?

The Zonos Global Trade Management (GTM) team does a monthly audit of our calculations that’s published with warts and all. We are dedicated to being transparent and accurate in our calculations.

Does Zonos guarantee their duty and tax calculations?

We offer the Zonos Landed Cost Guarantee to provide peace of mind on every quote. With the Landed Cost Guarantee, the duties and taxes are billed to Zonos. While we provide the most accurate landed cost on the market, international ecommerce is constantly shifting and there is a margin for error. If you are not signed up for the Landed Cost Guarantee, then the landed cost quotes are not guaranteed.

Is there an interface available to calculate import duties and import taxes?

Zonos Quoter is available as a standalone application, so you can easily calculate duties and taxes without integration.

Do I need to register and obtain a tax number in foreign jurisdictions?

It depends. In most cases, you do not need to register for taxes in a foreign jurisdiction; however, if you exceed the annual thresholds on low-value shipments in New Zealand or Australia, you may need to register. You can also use the Zonos Landed Cost Guarantee, and we’ll take care of registration and payment for the duties and taxes in the proper jurisdiction.