How duties and taxes are calculated

Customs authorities are responsible for collecting any duties and taxes on goods coming into and out of a country. Find out the difference between duties and taxes, what they’re based on and how they’re calculated.

What’s the difference between duties and taxes?

Customs duties are imposed to protect local industries against foreign competition and to generate revenue. Tax, or VAT, is the national charge placed on purchased products.

When do I need to pay the duties and taxes?

You usually have to pay them before your goods are released from customs. Your carrier may be able to pay on your behalf to ensure your goods are released quickly – and they’ll invoice you for the charges. But it’s worth double checking if they can do this before shipping.

What are duties and taxes based on?

They’re based on three factors – the HS code, value and trade agreements between different countries and nations.

How do customs officials assess the duties and taxes?

They use the information on your commercial invoice and other relevant documents. So it’s important to make sure you have details like the HS code and value on your commercial invoice.

And bear in mind, if you’re missing information, you’re leaving it up to customs to calculate the duties and taxes, which may result in you paying more than you should.

How is the duty calculated?

First, you need to find out the duty percentage rate applicable to the item you’re shipping.

You can find the duty percentage rate on the government website of the country you’re shipping to by typing in the HS code. For example, if you’re shipping a drone to the UK, the duty percentage rate is 0%.

To calculate the duty, you add up the value, freight, insurance and additional costs. Then multiply the total amount by the duty percentage rate.

Some countries use different calculation methods so remember to check this on your country’s government website or with your carrier.

How is tax calculated?

First, you need to find out the tax rate, which depends on the country you’re shipping to. In the case of shipping a drone, it’s 20% because you’re shipping to the UK.

To calculate the tax or VAT, you add up the value, freight, insurance, additional costs and the duty. Then multiply the total amount with the tax rate of the country you’re shipping to.

Anything else?

To find out more, ask your carrier for advice, go to the government website of the country you're shipping to, or use online tools.