Navigating international shipping and returns can be complex, especially when it comes to managing taxes and duties. Swap Global aims to simplify this process by providing a streamlined solution for handling global returns, offering real-time visibility and control over tax and duty refunds. A key component of this system is the concept of claimable taxes.
This article will explain claimable taxes and how they affect your returns process, as well as provide detailed insights into the specific types of taxes that Swap Global can handle.
What Are Claimable Taxes?
Claimable taxes are the portion of taxes paid during international shipping that can be refunded when an item is returned. These taxes are not collected directly at the border but are managed as credits by Swap Global. The refund process is straightforward because Swap can self-administer these taxes without requiring complex interactions with international tax authorities.
Claimable taxes typically include specific types of VAT or sales tax, where refunds are governed by clear regulatory frameworks. Conversely, duties paid at the border are generally non-claimable, as they require government-issued duty drawbacks, which vary by country and are often complex.
Claimable Taxes by Region
Swap Global supports the following claimable taxes, provided specific conditions are met:
1. IOSS (EU)
- Claimable: Yes
- Reason: Taxes are not paid at the port but are self-creditable under the IOSS scheme.
- Conditions: This applies to all orders under the de minimis threshold (€150), regardless of whether Swap or the brand holds the tax ID.
2. U.S. Sales Tax
- Claimable: Yes
- Reason: Taxes are not collected at the port but are self-creditable based on state-specific sales tax regulations.
- Conditions: Applies to orders under the de minimis threshold ($800) where brands or Swap hold the state-specific sales tax ID.
Non-Claimable Taxes and Duties
Some taxes and duties are non-claimable due to legal, administrative, or practical challenges:
1. Customs Duties
- Reason: Duties are always paid at the border and require government-issued duty drawbacks for refunds.
- Challenges: These processes are country-specific, complex, and costly to manage.
2. Excise Taxes
- Reason: These are applied to specific goods (e.g., alcohol, tobacco) and are generally non-refundable.
The Self-Credit System: How Swap Processes Claimable Taxes
Claimable taxes, such as IOSS and U.S. Sales Tax, are processed through Swap Global’s self-credit system. Here’s how it works:
- Tax ID Ownership: Claimable taxes can be processed regardless of whether Swap or the brand owns the tax ID (e.g., IOSS number or state sales tax ID).
- Refund Mechanism: Taxes paid later (not at the port) are deducted from future payments if an order is returned. This ensures a seamless refund process for both merchants and customers.
How Claimable Taxes Affect the Returns Process
When handling returns through Swap Global, you have several options for managing taxes and duties:
-
Do Not Refund Taxes & Duties:
- No taxes or duties are refunded to the customer.
- Suitable for low-value returns where refunds are impractical.
-
Refund Only Claimable Taxes:
- Only taxes that can be efficiently and legally refunded are returned to the customer.
- Balances customer satisfaction and cost efficiency.
-
Refund All Taxes & Duties:
- All taxes and duties are refunded to the customer, regardless of whether they can be reclaimed by Swap.
- May incur higher costs for the merchant.
Summary of Claimable Taxes
| Tax Type | Claimable? | Reason | Notes |
|---|---|---|---|
| IOSS (EU) | Yes | Not paid at the port; self-creditable | Applies under de minimis (€150). |
| U.S. Sales Tax | Yes | Not paid at the port; self-creditable | Applies under de minimis ($800) with tax ID. |
| Australia/NZ (Future) | Pending | Follows IOSS/U.S. Sales Tax model | Applies under de minimis once implemented. |
| Customs Duties | No | Paid at the port; government-issued drawback | Requires country-specific processing. |
| Excise Taxes | No | Paid directly; non-refundable | Typically applies to alcohol, tobacco, etc. |