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How to calculate import duty and VAT

Import taxes stack. Duty is charged on the customs value, and in many countries excise and VAT are then charged on a base that already includes the duty. This guide shows the standard order of calculation, a worked example, and the points where your destination may differ.

The order of calculation Customs Declare uses

Customs Declare models the layers in this order: customs duty, then excise, then VAT. Each layer uses the previous ones as part of its base. This layering is a modelling convention that fits many customs systems. It is not a verified rule for every country, so check your destination's own base before you rely on a figure for a filing.

  • Customs value (CIF): invoice value plus international freight and insurance, where the destination values on a CIF basis.
  • Duty = customs value x duty rate.
  • Excise = (customs value + duty) x excise rate, or a fixed amount per unit for specific excise such as fuel, alcohol and tobacco.
  • VAT = (customs value + duty + excise) x VAT rate.

Steps to calculate it

  1. Find the customs value. Start from the invoice value and add freight and insurance if the delivery term left them out, as with EXW, FCA, FAS and FOB. Under CFR and CPT insurance is still missing. Under CIF and CIP both are already included.
  2. Convert to the destination currency if needed. Use the exchange rate the destination's customs authority requires for the declaration date. Keep the rate you used on file.
  3. Classify the goods and find the duty rate. The HS code and the destination's national tariff line give the general (MFN) rate. If the goods qualify under a trade agreement, a lower preferential rate may apply, and you need the origin proof to claim it.
  4. Calculate the duty. Multiply the customs value by the duty rate. For a specific duty, multiply the rate per unit by the quantity in the unit the tariff uses.
  5. Add any excise. Check whether the HS code carries excise in your destination. Ad valorem excise is charged on customs value plus duty in the modelled order. Specific excise is an amount per litre, kilogram or item.
  6. Add levies and surcharges. Some blocs and countries charge a community or solidarity levy, usually on the CIF value alone. Trade-remedy duties such as anti-dumping or safeguard duties are added on top of ordinary duty and can enter the VAT base.
  7. Calculate the VAT. Multiply the customs value plus duty plus excise by the VAT rate. Some goods are exempt or zero-rated; a confirmed exemption is a zero, not a missing figure.
  8. Add the parts up. Duty + excise + levies + VAT is the total border tax. Add it to the CIF value to see the landed cost at the port.

Worked example (illustrative numbers)

Goods invoiced at 10,000 USD FOB, with freight of 800 USD and insurance of 100 USD. Duty rate 10%, VAT rate 15%, no excise. These rates are examples, not a real tariff line.

  • CIF value: 10,000 + 800 + 100 = 10,900 USD.
  • Duty: 10,900 x 10% = 1,090 USD.
  • VAT base: 10,900 + 1,090 = 11,990 USD. VAT: 11,990 x 15% = 1,798.50 USD.
  • Total border tax: 1,090 + 1,798.50 = 2,888.50 USD.
  • Cost at the port: 10,900 + 2,888.50 = 13,788.50 USD.

The same example with 5% excise

If the goods also carry a 5% ad valorem excise, excise is 11,990 x 5% = 599.50 USD. The VAT base grows to 10,900 + 1,090 + 599.50 = 12,589.50 USD, so VAT is 1,888.43 USD (rounded). Excise raises the VAT as well as adding its own tax.

Where your destination may differ

  • The customs value may be on a FOB basis instead of CIF.
  • VAT or excise may use a different base than the modelled order.
  • Some countries add fees for the port, the scanning, the declaration or a statistics levy that are not a percentage of value.
  • Exemptions, suspensions and duty relief for inputs, samples or returned goods can change the result.
  • Rounding and exchange-rate rules differ.

Frequently asked questions

Is VAT charged on the invoice value or on invoice plus duty?

In many countries import VAT is charged on the customs value plus duty and any excise, which is how Customs Declare models it. Some countries differ, so confirm your destination's base.

Do I pay duty on freight and insurance?

Where the destination values goods on a CIF basis, yes. Freight and insurance to the port of importation are part of the customs value. Under the WTO Valuation Agreement each member decides whether to include them.

Can a trade agreement reduce both duty and VAT?

A trade agreement can reduce or remove customs duty for qualifying origin goods. VAT is a domestic tax and is normally not reduced by the agreement, but a lower duty also lowers the VAT base.

Sources

Last verified: 2026-09-29

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