Inward and outward processing

Inward processing Poland

The inward processing procedure is one of the special customs procedures used in international trade. It allows goods to be brought into the European Union from outside the EU customs territory for further processing without having to pay import duties and VAT upfront. The goods may undergo processing, assembly, repair or other operations and can then be exported outside the EU customs territory.

Using this procedure can bring significant savings – especially when the processed products are intended for export. Authorisation for inward processing is granted on the basis of a customs declaration and requires approval by the Head of the competent customs and fiscal office. Once the procedure is completed, the processed products must be discharged and their next step indicated – whether they will be exported outside the EU or released for free circulation within the EU, which then requires payment of the relevant customs duties.

Types of inward processing

Under inward processing, two main models are distinguished:

• Inward processing IM/EX – non-EU goods are imported into the EU for processing or repair and then exported outside the European Union. This is the classic model used in manufacturing and assembly industries.
• Inward processing EX/IM – Union goods are exported outside the EU for further processing and then re-imported into the EU. This model is used when certain processing operations are cheaper or more efficient outside the EU.

Outward processing Poland

Unlike inward processing, the outward processing procedure allows Union goods to be exported outside the EU customs territory for repair, processing or improvement and then re-imported with the possibility of full or partial relief from import duties.

A condition for using this procedure is demonstrating that the goods processed outside the EU and the goods returned to the EU have the same technical parameters or correspond to the same 8-digit Combined Nomenclature code. The customs authority may also allow the use of equivalent goods that replace the goods originally exported.

Businesses can use outward processing when export is related to improving product quality, carrying out repairs, or reducing production costs. Customs authorities require a customs declaration and documents confirming that the economic and technical conditions are met.

Who can use inward or outward processing?

Inward and outward processing can be used by companies providing processing services as well as manufacturers in sectors requiring modification, repair or assembly of components. A formal requirement is obtaining an authorisation from customs authorities, which may be granted based on:

• a customs declaration containing detailed information on the planned operations,
• an economic conditions analysis showing that processing (e.g. outside the EU) brings economic benefits,
• compliance with EU regulations, including environmental and technical standards.

Companies using these procedures must keep accurate records of operations, enabling later settlement of customs and tax liabilities and effective monitoring of processing activities.

What goods can be covered by inward or outward processing?

There is no fixed list of goods that may be placed under inward or outward processing. In practice, most goods may be eligible, provided the required conditions are met and the appropriate authorisations are obtained. Key factors include the economic conditions, compliance with EU regulations, and any restrictions resulting from EU trade policy. In inward processing, goods may be processed, assembled, repaired or otherwise worked on. In outward processing, the procedure is most often used for goods requiring repair or technical upgrades outside the EU.

Inward and outward processing and VAT

Using processing procedures affects a business’s tax obligations, particularly VAT. Under inward processing, if the product is ultimately released for free circulation in the EU, import VAT and customs duties must be paid. Under outward processing, partial relief from import duties may be available, reducing the overall tax burden.

Businesses using special procedures must also consider issues related to release of goods, customs status and correct declaration to customs authorities. The use of replacement products and equivalent goods requires detailed monitoring and documentation to benefit from these procedures.

In summary, inward and outward processing can be highly beneficial for businesses involved in exporting goods and processing them outside the EU. However, to use these opportunities, specific conditions must be met and the relevant procedures must be followed.