Inward Processing Customs Regime (“IPR”) is a customs regime that allows a company to benefit from import duties relief. |
| |
The IPR is applicable to raw materials that are temporarily imported in Romania in order to be processed and subsequently re-exported. Nevertheless the IPR customs regime could be fortuitously ended by the definitive import of raw materials and/or end products obtained. The IPR comes in two different forms, namely: |
| |
|
IPR suspension system , according to which no import duties would be levied at the initial |
| |
moment of placing the raw materials under this regime (i.e. at the import date); the import duties are guaranteed through a bank letter of guarantee, but an exemption from this obligation could be obtained in certain cases based on specific documentation; |
|
IPR drawback system, according to which the import duties are paid upfront at the clearance |
| |
date. The import VAT is recoverable in the next month through the VAT return. For customs duties a refund application can be submitted after the effective export of the finished products, following which the customs authorities will grant re-imbursement of the abovementioned taxes to the holder of the IPR regime. Under this system devaluation of the reimbursed amount would occur. |
| |
|
From a cash flow perspective, the IPR suspension system is more favorable than the IPR reimbursement system, offering more cash flow benefits and higher profit margins. Given the tendency of reduction/elimination of customs duties for imported goods originating in European countries, the implementation of IPR is generally most advantageous from a VAT perspective. |
|
Thus, it is very likely that companies importing raw materials on a definitive basis and exporting the end products find themselves under a VAT reimbursable position. Under the circumstances, they incur huge losses resulting from devaluation and opportunity cost of capital. In addition, there are also economic risks (e.g. high frequency of fiscal controls), which cannot be quantified, but which could further increase the costs related to VAT reimbursement. The implementation of IPR suspension system eliminates these problems, as these companies do not need to pay import VAT and to wait for further reimbursement. |
| |
|
PricewaterhouseCoopers has considerable experience in implementing such customs regime and can help you to increase the cash flow of the company. For further information please contact our specialists in the Indirect Department of PricewaterhouseCoopers in Bucharest or Timisoara offices. |
| |
