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Examples of Landed Costs Calculations

Last updated 04/10/2017

This article provides some typical examples of calculating landed costs, organised by country. Purchases for Freight and Customs Duty must be entered correctly in order to calculate landed costs, and also to ensure that the correct tax is applied when importing to your Accounting Software.

Overview


This article gives an examples of what an 'import costs' Purchase Order may look like in Australia, New Zealand, UK and USA.

For simplicity, the following examples have assumed that Customs Duty is charged in the same invoice as Freight, however, this won't necessarily be the case if you pay separate suppliers for these fees. Nevertheless the principle remains the same.

Please refer to Applying Import Costs to a Purchase Order (Calculating Landed Costs) for more information on the entire process.

Australia


Here is an example of a typical Australian import costs Purchase Order.

  1. The first line here represents the cost of the freight. This has been applied to the original PO (PO-416) in the Transaction Links column. The Tax rate is GST Free Purchases, as the cost of Freight is not taxed.
  2. In the second line, Customs Duty has been entered. Because the product name includes 'customs' the cost will be applied across all products in PO-416 in proportion to the value of the products.
  3. The third line represents GST Paid on Imports. This is not applied to the original Purchase Order. It's tax rate has been assigned GST Paid on Imports in the Account column.
  4. The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this non-recurring fees! It has not been applied to the original Purchase Order, but you could do this too if necessary.
  5. Note that at position 5 the only GST on the order is for the Additional Fees.

New Zealand


Here is an example of a typical New Zealand import costs Purchase Order:

  1. The first line here represents the cost of the freight. This has been applied to the original PO (PO-98) in the Transaction Links column. The Tax rate, in the Account column, is GST Zero Purchases, as the cost of freight is zero rated.
  2. In the second line, Customs Duty has been entered. Duty is exempt of tax - so in the Account column, the Tax Rate Exempt Purchases has been used.
  3. The third line represents GST Paid on Imports. GST amounts should not contribute to the landed cost of a product, so has not been applied to the original Purchase Order. It's tax rate has been assigned GST Paid on Imports in the Account column.
  4. The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this for non-recurring fees! This additional charge has been applied to the product purchase order (PO-98). GST will be charged on this line, so no alternative account needs to be chosen.
  5. Note that at position 5 the only GST on the order is for the Additional Fees.

UK


Here is an example of a typical UK import costs Purchase Order:

  1. The first line here represents the cost of the freight. This has been applied to the original PO (PO-617) in the Transaction Links column. The Tax rate, in the Account column, is VAT Zero Purchases, as the cost of freight is zero rated.
  2. In the second line, Customs Duty has been entered. Duty is exempt of tax - so in the Account column, the Tax Rate Exempt Purchases has been used.
  3. The third line represents VAT Paid on Imports. VAT amounts should not contribute to the landed cost of a product, so this has not been applied to the original Purchase Order. It's tax rate has been assigned VAT on Imports in the Account column.
  4. The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this for non-recurring fees! This additional charge has been applied to the product purchase order (PO-617). VAT will be charged on this line, so no alternative account needs to be chosen.
  5. Note that at position 5 the only VAT on the order is for the Additional Fees.

US


Here is an example of a typical United States import cost Purchase Order:

  1. Note how, like any other purchase, this order is Exempt of Tax.
  2. The line at position 2 represents the cost of the freight. This has been applied to the original PO (PO-72).
  3. The line at position 3 represents Customs Duty. This has been applied to the original PO (PO-72).
  4. The final line has been entered without creating a product in the Products module, hence there is no code in the code column. It is completely fine to do this for non-recurring fees! This additional charge has been applied to the product purchase order (PO-72).

FAQs

I can't find any tax rates in the accounting drop-down?

You'll need to set up some Tax Rates first before applying them to line items - see Tax Rates Setup for guidance.