DDP vs DAP explained: who pays import VAT and duty

A customer in Germany refuses the parcel. It arrived with a customs bill they were not expecting, and rather than pay it they sent it back. You have lost the sale, the outbound shipping, the return shipping, and the goods are sitting in a bonded warehouse somewhere outside Frankfurt.

The delivery term you agreed decided that outcome. DDP and DAP are the two candidates, both of them Incoterms published by the International Chamber of Commerce, and both of them put the goods at the same door. What separates them happens earlier, at the border.

That makes this a tax question well before it is a shipping question, which is why most explanations of it are unsatisfying. This post covers what each term obliges you to do, who becomes importer of record, what happens to the import VAT, and when DDP is not an option at all.

DDP and DAP, in one sentence each

• DDP (Delivered Duty Paid). You deliver to the buyer's door and you handle import clearance, duty and import taxes yourself. The ICC describes the seller as responsible for "carrying out and paying all customs formalities, including export, import ... and, if applicable, transit procedures", and notes that the import part "may be difficult for a foreign seller".
• DAP (Delivered at Place). You deliver to the agreed destination ready for unloading, and the buyer handles and pays the import formalities, duty and taxes.

The mechanics either side of that are the same, and this is the only paragraph they get. Under both terms you arrange and pay for carriage to the destination, and you carry the risk until the goods arrive there. Delivery happens at the same point. Every difference between DDP and DAP is a difference about the border.

Obligation	DDP	DAP
Export clearance	Seller	Seller
Carriage to destination	Seller	Seller
Risk until arrival	Seller	Seller
Import clearance	Seller	Buyer
Import duty	Seller	Buyer
Import VAT	Seller	Buyer
Importer of record	Seller	Buyer

That last row is the one with consequences, and it is the row most explanations skip.

Who is the importer of record?

Importer of record is a legal status, not a payment arrangement. Whoever holds it is the party the customs authority deals with, and the party it holds responsible.

That responsibility covers more than writing a cheque:

• The accuracy of the customs declaration
• The classification of the goods and the customs value declared
• The duty and import VAT due on that declaration
• Record-keeping obligations in the destination country
• Exposure if any of the above turns out to be wrong, including penalties and back-assessments

Under DAP the buyer holds this status, which is why DAP is administratively simple for you. Under DDP you hold it, in a country where you may have no presence, no local advisers and no registration.

Which raises a problem no competing explanation mentions, and in the EU it is not a soft restriction but a rule. The Union Customs Code states that "the declarant shall be established in the customs territory of the Union". The declarant is the customs-law role behind the commercial term importer of record.

The exceptions are narrow. They cover transit and temporary admission, people who lodge declarations only occasionally where customs considers it justified, and businesses in countries adjacent to the EU whose own country grants reciprocal treatment. Routine ecommerce shipments from outside the EU fit none of them.

So a seller with no EU establishment generally cannot file in its own name at all. The way through is indirect representation: a customs representative may act "in his or her own name but on behalf of another person", and must itself be established in the Union. That is how non-EU sellers quote DDP into the EU, and the representative carries real exposure for doing it, which is reflected in what they charge. Our guide to tax representatives around the world covers how these arrangements work.

The import VAT problem with DDP

Here is the part the freight explainers leave out, and it starts with a distinction they tend to collapse.

Duty and import VAT are two different charges. Duty is a cost: you pay it, it is gone, you price it in. Import VAT is a tax, and whether it comes back to you decides whether DDP is an inconvenience or a margin problem.

Paying it

Under DDP you pay import VAT at the border, in the destination country, at that country's rate. It is calculated on the customs value of the goods, not on your sale price, so it is not simply a percentage of what the customer paid you.

It is also cash out before the customer's money reaches you, on a base you may not have priced for.

Reclaiming it, or not

The natural assumption is that import VAT behaves like any other input tax and comes back on a return. Often it does not.

There is a refund procedure. A business not established in the EU that is charged VAT in an EU country "where you have not supplied goods or services" can apply to that country's authorities for a refund.

Read the condition carefully, because it is the catch. A seller importing goods under DDP and then delivering them to a customer in that same country is frequently making a supply there, which is the situation the refund route excludes. Registration becomes the alternative, and our guide to getting a VAT number covers what that involves.

There is a second condition. Some EU countries grant refunds only where the applicant's home country offers similar arrangements to their businesses, so the route can close depending on where you are established.

Where neither registration nor refund is available:

What it does to your pricing

Under DDP the landed cost is yours. To price the order correctly you need to know the duty and the import VAT at checkout, not at the border, and for physical goods that means knowing the classification and the destination rate before you quote. Our guide to VAT, GST and sales tax on physical products covers how those rates get determined.

Under DAP the charge lands on the customer instead. That is cheaper for you and worse for them, and it is what produced the refused parcel in the introduction. Both of those are real, which is why this is a trade-off rather than a right answer.

When DDP is not even an option

Before choosing DDP on customer-experience grounds, there is a restriction worth knowing, and it comes from the ICC itself rather than from any vendor.

DDP cannot be used where the import customs authorities legally require the local buyer to handle clearance. In those countries, the ICC says plainly, DAP is "the appropriate Incoterms® rule".

This matters because the failure is silent until it is expensive. Nothing stops you writing DDP into a quote for a country that will not let you act as importer. You find out when the goods are at the border, the declaration cannot be filed in your name, and somebody has to renegotiate terms with the shipment already in transit.

How IOSS changes the answer for EU ecommerce

For consumer sales into the EU there is a third route, and it rarely comes up in advice written by freight companies.

The Import One-Stop Shop was created "to simplify the declaration and payment of VAT for distance sales of low value goods not exceeding 150€ imported from third territories or third countries". Under it, you charge the customer VAT at checkout at their country's rate and account for it through a single return, rather than dealing with the VAT consignment by consignment as each one arrives.

The effect on this decision is the interesting part. You give the customer the DDP experience, with everything paid at checkout and no bill at the door, without taking on import VAT liability in every destination country you ship to.

The boundaries matter:

• It applies to consignments not exceeding €150 in value. Above that, you are back to the DDP versus DAP question.
• It covers distance sales to consumers. B2B sales are outside it.
• Goods subject to excise duties are excluded, so alcohol and tobacco stay outside the scheme whatever the consignment is worth.
• Customs duty is a separate matter from import VAT, and IOSS does not deal with duty.

Two things sit either side of it. The old relief for small consignments is gone: the exemption for imports up to €22 was removed, which means "all goods imported in the EU are subject to VAT". And where IOSS is not used, the EU introduced "special arrangements for distance sales of imported goods in consignments not exceeding EUR 150", so there is a defined fallback rather than a gap. Worth asking your carrier which route they are putting your parcels through, because it decides what your customer sees at the door.

Take a €90 order to a consumer in Germany, priced three ways:

Route	What the customer experiences	Your position
DAP	Pays your price, then meets a customs bill for German VAT plus the carrier's handling fee. May refuse the parcel rather than pay it	No import VAT exposure, but a real risk of refusal
DDP	Nothing to pay at the door	You settle the German import VAT and either absorb it or price it in, recoverable only if you are registered there
IOSS	Nothing to pay at the door	You charge German VAT at checkout and remit it on a single return

The customer's experience is identical in the second and third cases. Your compliance position is not.

If you sell into the EU, our explainers on the IOSS scheme and on choosing between OSS and IOSS cover the registration and reporting side.

Choosing between DDP and DAP

The general shape: DAP is cheaper and simpler for the seller and worse for the buyer. DDP is better for the buyer and puts a compliance obligation on the seller. Neither is universally correct.

Situation	Usually better	Why
Consumer sales into the EU, consignments up to €150	IOSS, not DDP	Same customer experience without import VAT liability at the border
Consumer sales above €150	DDP, if you can recover the VAT	Surprise customs bills drive refused deliveries
B2B, where the buyer imports regularly	DAP	The buyer already has the registration and the process
Countries restricting non-resident importers	DAP	DDP may not be legally available to you
One-off or low-volume shipments	DAP	Registering to recover VAT rarely pays for itself

Four questions to answer before quoting DDP:

• Can you legally act as importer of record in that country?
• Can you recover the import VAT once you have paid it?
• Do you know the landed cost at the point of sale?
• Can you file, or have someone file, the declaration?

DDP quoted without those answers is the most expensive of the options, because it combines the seller's liability with the buyer's surprise. If you are working out the wider picture, our guide to cross-border ecommerce covers what else changes when you start shipping internationally.

Getting the tax right before the parcel moves

The failure underneath all of this is pricing a cross-border order without knowing its tax position, then discovering it at the border when the options have run out.

Quaderno determines the tax due on a sale by customer location and product type at the point of sale, validates customer tax numbers as they are collected, and keeps per-transaction records with the tax broken out for whichever return it belongs in. To be clear about the boundary: Quaderno is not a customs broker. It does not file customs declarations or calculate duty. What it handles is the VAT and sales tax on the transaction itself.

If you sell into the EU, the low-value consignment rules change this decision entirely. Our guide to OSS and IOSS covers which scheme applies to you and what each one asks for.