France announced that from January 2026 it will withdraw Regime 42 for goods moved via “one-off fiscal representation”. This is not an immediately recognisable customs procedure to many, but the change to Regime 42 will significantly impact how many firms exporting to the EU handle VAT payments.
We asked Chartered Institute of Export & International Trade Customs Practice director, Anna Doherty, to outline the consequences for firms exporting their goods to the EU, and the customs intermediaries supporting them to do this.
What is Regime 42?
Regime 42, or ‘customs procedure code 42.00’, covers onward supply relief for VAT, which Doherty explains enables the deferment of VAT payment on “goods being imported into one member state of the EU which are destined for a consignee in another member state”.
In essence, goods from a third country, like the UK, can enter the EU through a member state, like France, without VAT being collected at the border, provided they are destined for onward sale to another EU member state within 30 days.
Solution to Brexit?
Many customs intermediaries and freight forwarders have hailed Regime 42 as the ‘solution to Brexit’, especially for businesses exporting their goods via France under Delivered Duty Paid (DDP) Incoterms.
Within Incoterms, DDP places maximum responsibility on the seller. This can make the seller’s products more appealing to overseas buyers, but it makes the exporter responsible for paying import customs duties and VAT.
However, combined with Regime 42, the VAT responsibility is deferred to the customer in the country of destination, and treated as an intra-community supply. This means that the importer should account for it as an acquisition tax on their VAT return.
Challenges
The European Court of Auditors published the results of an investigation into VAT fraud on imported goods, finding that flaws in simplified import customs procedures, like Regime 42, were largely responsible.
It found “gaps and inconsistencies in the EU regulatory framework” around VAT collection, noting “serious weaknesses” in how member states ensure the correct amount of VAT is collected.
These weaknesses were exploited to the cost of €89bn in lost EU tax revenue in 2022, with the European Court of Auditors naming lost VAT on imports as “one of the main types of cross-border VAT fraud affecting the fiscal policies and public finances of the EU” in its assessment.
An extreme example of this kind of exploitation was uncovered this year by the European Anti-Fraud Office and Polish authorities, which exposed a gang working to commit large-scale VAT fraud. Members of the gang moved goods by rail from China into Germany, where they were declared under Regime 42, before being moved back East to Poland.
A false trail of documents claimed the goods had been exported from Germany to other EU nations, legitimising the use of Regime 42, when they were instead illegally distributed to other nations in the bloc, enabling the “systematic evasion of VAT and the generation of significant illicit profits”.
In order to prevent both large and small-scale abuses of the regime, the European Court of Auditors recommended that the European Commission propose changes to the regulatory framework to ensure a more “consistent application… across member states”.
Closing the VAT ‘loophole’
France has taken up this recommendation and is changing its law to tighten the restriction on use of Regime 42.
From January 2026, “one-off fiscal representation (représentation fiscale ponctuelle)” for non-EU imports will no longer be permitted.
“Customs representatives will no longer be able to use their own VAT number to act as a one-off fiscal representative for imports under Regime 42 on behalf of companies not established in the EU,” Doherty says.
“Traders will need to register for their own French VAT and file their own VAT returns to continue to benefit from Regime 42.”
What do you need to do?
For non-EU firms looking to bring goods to the EU via France using DDP, Doherty says that conditions for doing so will now be “more demanding”.
While Regime 42 is still available for imports into France that are then moved to another member state, “non-EU businesses can no longer bypass French VAT registration via one‐off representation”.
“Non-EU importers must take on VAT and fiscal obligations directly or via a qualified representative.”
This means either registering for VAT in France or using an EU importer of record – from 2026, she reiterates that the importer of record cannot be an “one-off representative” in France.
The Netherlands
The Netherlands has been proposed by some as an alternative entry point to France.
Doherty notes that Regime 42 is often used for goods imported into Dutch ports and airports.
She adds that outside of direct VAT registration, permissible avenues for non-EU businesses include fiscal representation on both a “general or limited” licence, with “Article 23 import VAT deferment mechanisms commonly used”.
Article 23 is a reverse-charge mechanism available to those with Dutch fiscal representation – as it facilitates deferred payment it can be used to optimise cash flows.
At the moment, there’s no plan in place to abolish representative facilitation like in France, Doherty says.
DDP and accountability
However, Doherty warns that using DDP and Regime 42 “carries a significant compliance risk” for the exporter and importer of record, which is something firms should factor into their decision-making.
“They cannot control whether the customer self-accounts for VAT in the destination country,” she says.
“The liability chain means that if the customer fails to pay, you or your fiscal representative may be liable for VAT penalties.”
The authorities may hold the declarant or representative liable for suspended VAT in the event that the customer’s VAT number is invalid or expired, if they fail to account for the acquisition or incorrect details are entered on the customs declaration. This is despite Regime 42 hinging on the assumption that the customer will properly declare the VAT in their country.
She also cautions that using DDP alongside Regime 42 carries increased audit exposure.
“Any mismatch between [Economic Operator Registration and Identification] EORI number, VAT number, transport documentation, or proof of arrival can trigger retroactive VAT claims”
Reducing risk
While it’s important not to overlook the degree of financial exposure involved, Doherty says that steps can be taken to minimise the risks around using DDP and Regime 42.
Customers’ VAT numbers can be checked using before shipping using the EU’s VAT Information Exchange System.
As with all good compliance practice, she notes the importance of recording key documentation: CMRs, airway bills and other transport proof evidencing that the goods moved cross-border as well as checking that the customs declarations are completed correctly.
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