Customs credit for businesses

For a business that imports regularly, the question is not only how much customs duty and other charges have to be paid, but when. If you have to front the customs duty, import VAT and excise duties at every single customs clearance, you tie up working capital every time a consignment crosses the border. Customs credit (tollkreditt) is the scheme that solves exactly this: it lets your business defer payment and settle up once a month instead. In this guide we go through what customs credit is, how a business applies to the Norwegian Tax Administration (Skatteetaten), which conditions and security requirements apply, what the scheme costs, and why deferred payment can matter a great deal for cash flow in an import business.

What is customs credit?

Customs credit is a credit scheme for deferred payment of the charges that arise when you import goods into Norway. In practice it means that the business avoids paying customs duty, import VAT and any excise duties on each individual import. Instead, all the charges incurred during one calendar month are pooled, and the full amount falls due for payment on the 18th of the following month.

The scheme is administered by the Norwegian Tax Administration, which is also responsible for import VAT and excise duties. If you want the groundwork in place first, meaning the difference between customs duty, VAT and excise duty and who administers what, we have a separate guide to what customs duty is. Here we stay on the financing side: how you pay, and how customs credit moves the payment forward in time.

Why is customs credit good for cash flow?

The practical gain from customs credit is cash flow. Without credit, customs duty and other charges must as a general rule be settled at the time of import, in practice in cash on the same day the goods are cleared. For a business with many consignments a month, that means capital is tied up continuously, often before the goods have even been sold on.

With customs credit you turn this around:

• You pay once, not many times. All the imports in a month are pooled into a single due date.
• You get a real payment deferral. Charges from the whole of January do not fall due until 18 February, so the goods may have time to be sold before the bill arrives.
• You avoid cash settlement at the border. Norwegian Customs itself describes customs credit as a more favourable payment arrangement for the declarant than paying in cash on import.

For import-heavy businesses this is precisely the difference between fronting money for the state on every consignment and having the charges as a single predictable monthly item. How import VAT itself is calculated and reported is a separate question from when the charges fall due, and one that depends on whether your business is registered in the VAT Register.

Who can get customs credit?

Customs credit is reserved for businesses that import or export goods in their own name. In other words, it is the owner of the goods, the importer or the exporter, who can obtain credit, not an intermediary acting on behalf of others. The Norwegian Tax Administration sets some clear conditions before credit is granted:

The key conditions are that the business:

• imports or exports in its own name, since the credit follows the owner of the goods, not the representative,
• is registered in the Register of Business Enterprises (Foretaksregisteret),
• is registered in the VAT Register (Merverdiavgiftsregisteret),
• is creditworthy, meaning the Norwegian Tax Administration carries out a credit assessment before the credit is granted.

Either way, responsibility for the customs clearance being correct lies with the party importing the goods, including when a customs broker submits the declaration on its behalf.

How does a business apply for customs credit?

The application for customs credit is submitted electronically to the Norwegian Tax Administration through Altinn. The process is essentially as follows:

The credit requirement you state for a two-month period is the basis the Norwegian Tax Administration uses to set the credit limit. If the requirement changes, or if a credit has been closed, the Norwegian Tax Administration has a separate form for amending or reopening the customs credit.

Conditions, credit limit and security

Two concepts are worth understanding before you apply: the credit limit and provision of security.

The credit limit is set by the Norwegian Tax Administration on the basis of the requirement stated by the business. The point is that no one should have unlimited credit: the limit should be proportionate to how much customs duty and other charges the business actually incurs over a period. If you state a realistic credit requirement for the two-month period in the application, the limit will be set accordingly.

Provision of security is something the Norwegian Tax Administration may require as a condition for the customs credit, either before the credit is granted or at a later point. Whether security is required, and to what extent, is linked to the credit assessment. A solid, creditworthy business will normally face less stringent requirements than a newly established operator with no payment history. This is an assessment the Norwegian Tax Administration makes in each individual case.

Customs credit, daily settlement or cash: which suits you?

There are essentially three ways of settling customs duty and other charges on import, and it is useful to know which one fits your situation:

• Cash payment on import. The charges are paid at each customs clearance. Possible, but it ties up liquidity and is impractical for businesses with many consignments.
• Customs credit. For businesses that import in their own name. Gives deferred, pooled payment on the 18th of the following month, the usual solution for import-heavy businesses.
• Daily settlement. A separate scheme for customs brokers who clear goods on behalf of others, where the day's declarations are pooled into a single settlement. Not relevant for an owner of goods importing in its own name.

The distinction between customs credit and daily settlement confuses many people. The simple rule of thumb is this: if you import goods in your own company's name, customs credit is what applies. If you use a customs broker who clears goods for you, the broker may have daily settlement for its part, but your business still needs its own customs credit to get deferred payment on the goods you import yourself. If you want to understand the roles and the requirements Norwegian Customs sets at the border, we look more closely at that in the guide to Norwegian Customs.

Customs credit and duty relief: two different questions

It is easy to confuse when you pay with whether you pay. Customs credit is only about the first: the scheme defers the payment, but does not reduce the charge itself. If you want to reduce or remove the customs duty, other mechanisms apply, namely free trade agreements and duty relief, which require you to document the origin of the goods or to meet a condition for relief. Goods can therefore be both duty-free and cleared on customs credit: the relief decides the amount, the credit decides the moment of payment.

How we help you

As a digital customs broker we take care of the customs clearance itself for you: we classify the goods with the correct commodity code, establish the customs value, claim preferential duty rates where there is a basis for it, and declare electronically, so that the charges can be debited to the business's customs credit account. The customs credit itself is something the business applies for in its own name with the Norwegian Tax Administration, but we are happy to help you understand what requirements apply and how the scheme fits into your import flow.

Sources: Skatteetaten, Customs credit and Tolletaten, Payment of customs duty and other charges. Conditions, deadlines and rates may change; always check the current information with the Norwegian Tax Administration and Norwegian Customs before applying for customs credit.