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Duty
and Tax Calculation Methods
There are two generally accepted methods for calculating
duty rates: CIF and FOB. Most countries use the CIF method.
Some exceptions may apply. VAT (Value Added Taxes) are generally
applied on the CIF or FOB + Duty value. The figures used
below are for example only.
CIF
(Cost, Insurance, Freight) A pricing term indicating
that the cost of goods, insurance, and freight are included
in the quoted price. Duty is calculated by adding all costs
together. See below for example.*
| Invoice
Value |
$932 |
| Insurance
Paid |
$16 |
| Freight
Paid |
$52 |
| Total
CIF Value |
$1000 |
| Duty
Rate = 7% |
x
.07 |
| Duty
Charge |
$70.00 |
| Total
CIF+Duty Value |
$1070.00 |
| VAT
= 18% |
x
.18 |
| VAT
Tax Charge |
$192.60 |
| CIF+Duty+VAT |
$1262.60
|
FOB
(Free on Board) A pricing term indicating that the cost
of the goods, including all transportation and insurance
costs from the manufacturer to the port of departure, as
well as the costs of loading the vessel, are included in
the quoted price. It should be noted that the Incoterm FOB
applies only to shipments via sea or inland waterway transport.
For the purpose of calculating duties and taxes for international
shipments, the term FOB generally applies to the commercial
invoice value and does not include the cost of shipping
and insurance. See below for example.*
| FOB
Value |
$932 |
| Duty
Rate = 7% |
x
.07 |
| Duty
Charge |
+
$65.24 |
| Total
FOB + Duty Value |
997.24 |
| VAT
= 18% |
x
.18 |
| VAT
Tax Charge |
$179.50 |
| FOB+Duty+VAT
|
$1176.74
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*
NOTE: The information presented above is for example only.
The duty and tax rates listed above are not specific to
any HS (harmonized system) number or country.
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