Adjustment of customs value: how to safely report it in the VAT return

Adjustment of the customs value of imported goods directly affects VAT accounting, the input tax credit, and the risk of additional assessments during tax audits, but the VAT implications and timely reflection of changes in the VAT return are often ignored, which may ultimately result in fines, penalty interest, and additional claims from the tax authorities.

1. Starting point: customs value as the VAT base.
Upon import, the customs value serves as the VAT base, taking into account customs duty, excise tax, and other mandatory payments; the input tax credit is formed on its basis using the data from the customs declaration. If the customs office increases the customs value, the VAT base and the tax amount increase, and the taxpayer must adjust the VAT return to preserve the input tax credit and reconcile the data of the customs office, the Unified Register of Tax Invoices, and its own reporting.
2. When the obligation to adjust VAT arises.
The obligation to adjust VAT arises in the period when the customs office increases the customs value, additionally assesses VAT, and the taxpayer pays the additional amount and receives a document from the customs authority (adjustment sheet, additional customs declaration, etc.). In this period, the taxpayer reflects the increase in the tax base and the additional input tax credit, without going back to the original import period, which reduces the risk of penalties and ties the adjustment to the current reporting period.
3. Documentary basis: what serves as grounds.
To adjust the input tax credit, the taxpayer needs a document from the customs authority confirming the change in customs value and the tax amounts. In practice, this may be: an adjustment sheet to the customs declaration, an additional customs declaration (if phased clearance is applied), or a decision on customs value adjustment accompanied by a recalculation of tax liabilities.

The availability of such a document is important for two reasons. First, it confirms that VAT was actually additionally assessed as a result of customs control, and is not an internal error of the taxpayer. Second, this document serves as the basis for reflecting the additional input tax credit in the VAT return, similarly to how a tax invoice functions for domestic transactions.

4. How to reflect the adjustment in the VAT return.
The mechanics of reflecting the adjustment depend on the version of the VAT return in force on the reporting date and on the official explanations of the tax authorities. The general approach is as follows: the initial import is reported in the lines of the VAT return intended for import operations (amount of customs value, tax base, and VAT according to the customs declaration). When the customs value is increased and additional VAT is assessed, the taxpayer, in the period of the adjustment, reports an additional amount of input tax credit corresponding to the additionally assessed VAT. If the VAT return form provides for a special line/appendix for customs value adjustments or for separate reporting of the adjustment sheet, these fields should be used to avoid discrepancies with customs data.

The idea is simple: the taxpayer “builds up” the input tax credit to the actual (increased) import base without changing the historical data of previous periods, and reports the addition in the current period. This approach allows synchronizing data between the customs system, accounting, and the VAT return.

5. Decrease in customs value and risks for the input tax credit.
If the customs value is reduced (for example, after an appeal), the taxpayer may receive a refund of part of the customs payments and VAT, and the previously claimed input tax credit becomes overstated. In the period in which the excessively paid VAT is refunded or the document confirming the reduction of the tax base is received, the input tax credit must be reduced; otherwise, during an audit, the tax authority may additionally assess tax liabilities, penalties, and interest.
6. Case law and the position of the supervisory authorities.
Cancellation by a court of a customs value adjustment gives the taxpayer the right to a refund of overpaid amounts, including VAT, and requires a reduction of the previously claimed input tax credit. The supervisory authorities insist that any changes in customs value must be reflected through an adjustment of the input tax credit, so the taxpayer must correctly structure VAT accounting from the outset while simultaneously challenging the actions of the customs office.
7. Practical recommendations for businesses.
To minimise risks, it is advisable to follow several practical approaches: synchronise accounting (ensure consistency of data in customs declarations, adjustment sheets, and VAT returns, including the use of internal checklists for the accountant for each customs value adjustment); ensure promptness (reflect input tax credit adjustments in the period when the customs document is received and/or the additionally assessed amounts are paid, without postponing this to “better times”); maintain proper documentation (keep a complete set of documents for each import transaction and its adjustment—customs declarations, adjustment decisions, payment documents, correspondence with customs—so that, in case of an audit, it is possible to justify both the amount of the input tax credit and the dates of its recognition); apply a comprehensive approach to disputes (when challenging customs decisions, simultaneously assess the VAT implications—when the right to an additional input tax credit or the obligation to reduce it will arise, and how this will affect the company’s cash flows).

Properly organised accounting of customs value adjustments makes it possible to turn a potential risk area into a controlled procedure where VAT consequences are predictable, documented, and aligned with the position of the supervisory authorities. As a result, the business receives not only fewer claims during audits, but also a more transparent financial picture of import operations. If you have any questions or issues related to customs value adjustments and the reflection of such transactions in the VAT return, please contact our specialists for individual advice.

Author – Svitlana Krutorohova, attorney at the law firm “Legal Company ‘WINNER’”.