Customs procedure 42 (procedure code 4200 in the customs declaration) is one of the most effective tools for companies that import goods from third countries into the European Union and then sell them to a customer in another Member State. The goods are released for free circulation in Slovakia, but no import VAT is paid – the tax is accounted for only in the country of destination. The company therefore does not tie up capital in VAT that it would otherwise pay at customs and then wait to deduct.
What exactly is customs procedure 42
It is the release of goods for free circulation with exemption from import VAT, because the import is followed by an exempt supply of the goods to another EU Member State. The goods merely “pass through” customs clearance in Slovakia and continue to the customer, for example in Czechia, Poland, Hungary or Germany.
The legal basis is Article 143(1)(d) and (2) of Council Directive 2006/112/EC on the common system of VAT. In Slovakia it is transposed by § 48(3) of Act No. 222/2004 Coll. on Value Added Tax (zákon o DPH). The customs procedure itself is governed by the Union Customs Code – Regulation (EU) No 952/2013.
What procedure 42 does not cover
Procedure 42 exempts only from import VAT. Customs duty (where applicable) and any other charges are paid as usual on release for free circulation. All non-tariff measures also apply – licences, certificates, veterinary or phytosanitary controls.
How an import under procedure 42 works, step by step
- Preparing the documents – invoice, transport documents, proof of origin, details of the customer in another Member State.
- Lodging the customs declaration – the customs declarant lodges the declaration with procedure code 4200 and states the required VAT identification numbers.
- Tax security, if required – the customs office may require security for the VAT before releasing the goods.
- Release of the goods – once the customs duty is paid, the goods travel directly to the Member State of destination.
- Reporting – the supply to another Member State is reported in the VAT return and in the EC Sales List (súhrnný výkaz); the customer in the country of destination accounts for VAT on the intra-Community acquisition.
Conditions for the exemption under § 48(3) of the VAT Act
The exemption applies only if the subsequent supply of the goods from Slovakia to another Member State would be exempt for the importer under § 43(1) to (4) of the VAT Act. At the time of import, the importer or its representative must provide the customs authority with at least the following information:
- the VAT identification number issued in Slovakia, or the special VAT identification number of the tax representative representing the importer under § 69a,
- the customer’s VAT identification number issued in another Member State, or the importer’s own VAT number in the Member State where the transport ends,
- evidence that the goods will be transported to another Member State – in particular a transport contract or a transport document.
If any of this information is missing, the customs office will not grant the exemption and will assess the VAT.
Tax representative for a foreign importer (§ 69a)
A foreign company that is not registered for VAT in Slovakia does not need to register because of procedure 42. Under § 69a of the VAT Act, it may be represented by a tax representative to whom the Tax Office Bratislava (Daňový úrad Bratislava) assigns a special VAT identification number. The representative may use one such number for several importers.
The tax representative keeps separate records for each importer, files the VAT return and the EC Sales List by the 25th day after the end of the calendar month, and, within the scope of the power of attorney, has the rights and obligations of the represented importer. A foreign importer using such a representative does not have to register under § 5 of the VAT Act.
Tax security (§ 48b)
The customs office may require tax security for imports exempt under § 48(3). It sets the amount and the payment deadline by a decision against which no appeal can be lodged. The security is released within ten days of submitting evidence that the transport of the goods ended in another Member State.
If proof of receipt of the goods by the recipient is not submitted within 60 days of the release of the goods for free circulation, the exemption is cancelled and the customs office assesses the tax, using the security lodged to pay it. A well-organised flow of documents from the carrier and the customer is therefore essential.
The most common mistakes with procedure 42
- an invalid or unverified customer VAT number (check it in the VIES system),
- a missing or inconsistent transport document,
- goods sold in Slovakia after import although they were declared for dispatch to another Member State,
- missing the deadlines for submitting proof of receipt of the goods and for filing the EC Sales List.
Frequently asked questions
Does customs procedure 42 also exempt from customs duty?
No. Procedure 42 concerns import VAT only. Customs duty is paid under the normal rules, or at a reduced rate if the goods have preferential origin.
Does a foreign company have to register for VAT in Slovakia?
Not necessarily. If it is not a VAT payer in Slovakia, it can use a tax representative under § 69a, who reports the import under its special VAT identification number.
What happens if the goods end up staying in Slovakia?
The conditions for the exemption are not met and VAT becomes payable. Such a situation must be resolved without delay with the customs office and the tax office.
When does the customs office release the tax security?
Under § 48b(3) of the VAT Act, within ten days of submitting evidence that the transport ended in another Member State.
Planning an import under procedure 42? Entity & Company, s.r.o. handles the customs declaration, direct and indirect customs representation, and tax representation under § 69a – from preparing the documents to the release of the security. See our customs services and fiscal representation, or contact us at info@entity-company.com or by phone at +421 55 381 6786.