The 2000% Tax Trap: Why 'FOB' vs 'CIF' in Your Contract Just Cost You €340K
Your international trade contracts contain a hidden bomb, and it's not the product quality or delivery timeline. We're talking about the seemingly innocuous Incoterms you use – specifically, the difference between 'FOB' (Free On Board) and 'CIF' (Cost, Insurance, and Freight). This isn't just academic jargon; it's a critical determinant of who bears the risk and cost of goods in transit, and crucially, who is liable for VAT and import duties. Misunderstanding this can lead to staggering, unexpected tax liabilities that dwarf the original invoice value. If you're an international creditor, CFO, or accounts receivable professional, failing to grasp this distinction can result in you footing a bill of hundreds of thousands of Euros, as demonstrated in this video. Learn how to identify this trap and secure your receivables before it's too late.
Key Takeaways
- Clearly define Incoterms in contracts to assign VAT and duty liabilities accurately.
- Understand how FOB shifts risk and responsibility to the buyer post-shipment.
- Recognize CIF places shipping, insurance, and import costs on the seller.