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Incoterms
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With Incoterms, business partners bindingly determine which agreements they have made regarding the transfer of risks and the transfer of ownership and ownership. Sales tax law is directly linked to these agreements. In order to be effective, the Incoterms should be included in sales to Switzerland, but also to Russia or China Commercial invoice be listed. In addition, it is important to mention them in the general terms and conditions. Please note, however, that some logistics companies, as well as shipping service providers, parcel services and transport companies, have little experience with the use of Incoterms and do not support their implementation.

Table of Contents

Meaning of the Incoterms

The Incoterms specify, among other things, which contractual partner bears which costs. These costs influence the value of the goods when they cross the border. The Incoterms therefore have a direct influence on the amount of customs duties and import sales tax. Above all, the Incoterms determine the transfer of risk and thus the place of delivery for VAT purposes. 

The Incoterms are adjusted regularly.

The following 2020 clauses apply in 11:

1. EXW – Ex Works

The seller must provide the buyer with access to goods at an agreed location. From this point on, the buyer assumes almost all costs and risks throughout the shipping process. The place of delivery is at the start of collection. Example: selling a machine from Germany to Switzerland. The place of delivery is Germany, the supplier does not have to register in Switzerland. The buyer is an importer and pays customs duty + import VAT

2. FCA – Free Carrier

The seller must make the goods available on his property or at an agreed location at his own risk and expense. In both cases, the seller is responsible for releasing the goods for export. It can also be agreed that the buyer must instruct the carrier to provide the seller with a “Bill of Lading (BL)” with a note on board. The place of delivery can therefore be anywhere, even on the high seas or in a third country. On the high seas, there is no sales tax law at all outside the 3 mile zone. The sales are then not taxable anywhere. When importing into a country, the importer complies with the declarations and pays the import taxes.

3. CPT - Carriage Paid To

The seller has the same obligations as with FCA, but in this case additionally bears the shipping costs. The same applies as to 2., but with correspondingly higher values.

4. CIP - Carriage and Insurance Paid to

The same obligations of the seller as with CPT, only in this case the seller is obliged to pay the insurance with high coverage. However, the parties involved can also agree on limited coverage. The same applies as to 2. but with correspondingly higher values.

5. DAP - Delivered At Place

The seller bears the costs and risks of transporting the goods to an agreed address. As soon as the goods arrive there and are released for unloading, possible risks are transferred to the buyer. The place of delivery for VAT purposes is the recipient. The supplier must bring the goods into the country, fulfill the reporting obligations and pay the import taxes. He must register beforehand when delivering to Switzerland.

6. DPU - Delivered at Place Unloaded

The seller bears the costs and risks of delivering the goods to an agreed destination where the goods can be unloaded for further transport. The seller arranges customs clearance and unloads the goods at the agreed location. The buyer is responsible for customs clearance and all related rights. The place of delivery is the place of unloading. This can also be in a third country. The sales tax consequences would be accordingly. Example. Sale of a machine from Germany to a Swiss customer using the DPU clause. The place of unloading is the Austrian border town of Lustenau. For the supplier this would be an intra-community delivery to Austria. He does not have to register in Switzerland. The customer imports the machine into Switzerland, completes the reporting obligations and pays the import taxes.

7. DDP - Delivered Duty Paid

The seller bears the costs and risks of transport, is responsible for import and export and pays any import duties. As soon as the goods arrive at the agreed address and are released for unloading, possible risks are transferred to the buyer. Solution. Same as 7. But with higher values ​​when importing.

8. FAS - Free Alongside Ship

The seller bears all costs and risks until the goods are delivered near the ship. From then on, the risk is transferred to the buyer, who also takes over customs clearance for export and import. Switzerland also has ports on the Rhine, which is also a border river. So it depends on which side of the Rhine the loading takes place.

9. FOB – Free On Board

The seller bears all costs and risks until the goods are on board the ship and is also responsible for the export permit. Once the goods are on board the ship, responsibility for shipping passes to the buyer. Caution: the export license is not the same as the reporting requirements upon import. Place of delivery is the location of the ship when loading, not the destination.

10. CFR - Cost and Freight

The same conditions apply to seller and buyer as for FOB. However, in this case the seller must pay for the transport of the goods to the port. Solution as in 9.

11. CIF - Cost, Insurance and Freight

The seller has the same obligations as with CFR, but also bears the (minimal) insurance costs. Any additional insurance must be borne by the buyer himself. Solution as in 9. But higher customs values ​​on import.

Jürgen Bächle
Jurgen Bachle

has been working as an independent tax consultant and expert in international tax law since 1989 and has been a member of the board of the German Association of Tax Consultants Baden-Württemberg, DSTVBW, for over 20 years.

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