Undervaluing goods at customs: why it's a serious mistake
It's a practice more common than it should be: declaring at customs a value lower than the real one to pay less tax. Some Chinese suppliers even offer it as a 'favour'. We explain why it's a mistake that can cost you dearly.
Beyond legality, you'll see that in most cases it doesn't even pay off financially.
What undervaluation is
Undervaluing is declaring at customs a goods value lower than what you actually paid, to reduce the base on which duty and VAT are calculated. In legal terms, it's customs fraud.
Why some suppliers propose it
For the Chinese supplier it has no cost and works as a sales hook: 'I'll put a low value on the invoice and you pay less tax'. The problem is that the risk isn't theirs: in importing, the one who answers to customs is you.
The consequences
- Financial penalties that can be several times the amount 'saved'.
- Holding and inspection of the goods, with their costs and delays.
- Possible seizure of the goods.
- A record that makes your future shipments scrutinised closely.
How customs detects it
Customs has databases with reference values by product type and origin. If you declare a value well below the usual one, the alarm goes off and they can require you to justify the price with the real invoice, payment receipts or the contract. If it doesn't add up, it's reassessed and penalised.
Besides, VAT is deductible
For a company, undervaluing makes even less sense: import VAT is deductible, so the only real 'saving' would be on the duty, against a huge legal risk. It doesn't pay off.
How R'S WARE helps you
We always work with the real value and the correct documentation. We calculate the taxes in advance so you know your exact cost and take it on with peace of mind, without resorting to practices that put your business at risk.
