Why EU Businesses Cannot Claim VAT Rebates When Shipping on a DDP Basis from China
- CNXtrans
- Jul 8
- 4 min read
When importing goods from China to the European Union, understanding the correct Incoterms is crucial for compliance, cost-efficiency, and reclaiming Value Added Tax (VAT). One common misconception among EU businesses is that they can claim VAT rebates even when importing goods on a Delivered Duty Paid (DDP) basis. Unfortunately, this is not the case — and misunderstanding this can lead to unexpected costs and compliance issues.
In this article, we explain why shipping DDP from China prevents EU businesses from claiming VAT rebates, how customs clearance works in such cases, and why switching to a Delivered Duty Unpaid (DDU) or DAP (Delivered At Place) arrangement is essential for reclaiming import VAT.
What Is DDP Shipping?
Delivered Duty Paid (DDP) is an Incoterm that places the maximum responsibility on the seller. Under DDP terms, the seller is responsible for transporting the goods, handling export and import customs clearance, paying all duties, taxes, and delivering the goods to the buyer’s premises or agreed location.
Many Chinese freight forwarders and suppliers offer DDP because it appears simple for EU importers — the seller or their appointed broker takes care of all the paperwork, duties, and taxes, making the process “hassle-free” for the buyer.
How Customs Clearance Works Under DDP
Under DDP, the Chinese supplier or their logistics agent uses a local customs broker in the EU to handle import customs clearance. Crucially, this broker will generally clear the goods under their own name and EORI (Economic Operators Registration and Identification) number, not the EU buyer’s.
From the customs authority’s perspective, the entity that appears as the “importer of record” is the broker or intermediary, not the EU business receiving the goods. The VAT is paid by the broker, who then charges it back to the Chinese supplier, who in turn invoices the buyer.
Why You Cannot Reclaim VAT on DDP Imports
EU VAT law allows businesses to reclaim import VAT only if they are the actual importer of record — that means the business must appear on the customs declaration as the entity responsible for the import.
When the broker clears goods under their own name for DDP shipments:
Your company’s name does not appear as the importer on the customs documents.
You will not have the import VAT declaration or customs documents showing your business as the importer.
Tax authorities will not accept a claim for a VAT rebate without this proof.
As a result, the import VAT becomes a cost to your business instead of a recoverable input tax. This can significantly affect your bottom line, especially on high-value shipments.
Example: The DDP Trap
Suppose your company imports €50,000 worth of electronics from China on a DDP basis. The freight forwarder or courier handles all customs clearance and pays the VAT (say 21% in the Netherlands). Because they clear it under their own name, you receive the goods but have no valid VAT invoice showing your business as the importer. You have effectively paid €10,500 in VAT that you cannot reclaim.
The Solution: Use DDU/DAP Terms Instead
To reclaim import VAT, you need to ensure that:
✅ Your company is the importer of record on the customs declaration.
✅ The import customs entry (SAD/Single Administrative Document) shows your EORI number.
✅ You receive an official import VAT invoice in your name.
To do this, ship on a Delivered Duty Unpaid (DDU) or Delivered At Place (DAP) basis. Under these terms:
The seller arranges transport to the destination, but the buyer is responsible for import clearance and paying any duties and taxes.
You (or your appointed customs broker) will handle customs clearance under your own name.
The VAT is paid directly to the customs authorities by your company.
You can then reclaim this VAT through your regular VAT return.
Common Pitfall: When DDP May Not Be the Best Fit
DDP shipping can be convenient — especially for businesses that don’t want to manage complex customs formalities themselves. For some smaller shipments or businesses without a valid EORI number or customs experience, DDP can save time and reduce administrative hassle.
However, it’s important to understand that using DDP means the supplier or their freight agent handles customs clearance under their own name, not yours. While this arrangement is often perfectly legitimate, it does mean you won’t appear as the importer of record — and therefore you cannot reclaim the import VAT.
So, if recovering import VAT is important to your business, DDP is usually not the best option. In these cases, it makes more sense to use DDU (Delivered Duty Unpaid) or DAP (Delivered At Place) terms instead. This gives you full control over customs clearance and ensures your business is listed on the customs entry so you can claim back the VAT.
Key Takeaways
✅ DDP means no VAT rebate — because your business is not the importer of record.
✅ You need to appear on the customs declaration to reclaim import VAT.
✅ Ship DDU or DAP so you handle import clearance in your name.
✅ Always work with reputable customs brokers who ensure compliant declarations.
✅ Be wary of “too-good-to-be-true” DDP deals — they often create hidden costs and compliance risks.
Final Thoughts
Understanding the difference between DDP and DDU/DAP shipping is essential for any EU business sourcing goods from China. If reclaiming import VAT is important for your cash flow — which it often is — you must structure your shipments so your company is the importer of record. Always consult your customs broker or tax advisor if you’re unsure.
By taking this simple but critical step, you can avoid unnecessary tax costs, remain compliant with EU VAT regulations, and protect your margins.
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