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What Is Fiscal Representation?

A. Leverkuhn
A. Leverkuhn

Fiscal representation is a process where an individual represents a business in a specific year and in specific transactions in world regions or countries. Although the idea can apply to any international business transactions, financial professionals all over the world commonly understand the concept as being related to importation to the European Union. In this case, fiscal representation helps companies to avoid certain kinds of taxation that apply to E.U. customs processes.

The financial world has established two separate kinds of fiscal representation that pertain to European Union transactions. One is limited fiscal representation (LFR). The other is general fiscal representation (GFR). In limited fiscal setups, where representation is necessary, the primary objective is deferment of the Value Added Tax (VAT). The VAT is a specific kind of tax applied in European Union countries. European Union regulations state that companies must have a certain kind of establishment inside the E.U. to avoid the VAT at customs. In LFR, a customs broker, or similar individual, handles this issue for a foreign business. In many cases, companies put this arrangement under the general heading of “logistics services.”

Woman holding a book
Woman holding a book

For representation on a general fiscal basis, companies that wish to complete more complex transactions within European Union countries may hire a consultant offering a greater set of representative services. Businesses that want to research this kind of representation should understand that the Netherlands plays a specific role in clearing customs for many European nations. Accordingly, different kinds of LFR or GFR must be handled through Rotterdam, or another Dutch location.

Companies that operate in different world regions should understand issues like fiscal representation and include them in their overall import/export strategy. Dealing with this kind of foreign financial policy is key to implementing better international business processes. Business leaders can also look at similar conditions for countries all over the world, where they may have to employ outside individuals on a consulting basis to help handle customs and other unique national processes for import or export of goods. The idea of representation for E.U. customs can also illustrate how “regionalization” of smaller countries and communities can lead to different regulatory processes, and where regionalization is becoming a trend; business leaders can sometimes these policies as a projection for what might happen in emerging markets or regional economies.

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