Exporting to the EU in 2026: VAT Changes & Regime 42

Regime 42 Abolition

Regime 42, formally known as Customs Procedure Code 4200, has long allowed non-EU businesses to import goods into one EU member state—often France—without paying import VAT at the border, provided the goods are immediately dispatched to another EU country. This mechanism exempted VAT on entry, treating the onward movement as a zero-rated intra-EU supply. For UK exporters post-Brexit, it became a cornerstone for efficient Delivered Duty Paid (DDP) arrangements, where sellers handle all customs and taxes up to delivery.

As of 1 January 2026, France eliminated limited fiscal representation under this regime for non-EU entities. Previously, companies could rely on a French representative's VAT number for clearance without their own registration. Now, importers must obtain a French VAT number or appoint a full fiscal representative, shifting the burden directly onto foreign businesses. This aligns France with stricter EU fiscal harmonization but disrupts established routes, particularly through Calais, a key entry point for UK-EU trade.

The change affects an estimated thousands of UK exporters, especially in e-commerce and manufacturing sectors reliant on just-in-time delivery. Concrete impacts include upfront VAT payments that tie up capital—potentially 20% of goods' value—until reclaimed, alongside registration costs ranging from €500 to €2,000 annually per business. Non-compliance risks fines up to €750 per undeclared transaction, customs holds delaying shipments by days, and eroded profit margins from higher logistics fees.

Less obvious tensions emerge in stakeholder dynamics: French authorities gain better tax oversight, reducing fraud estimated at €93 billion EU-wide in 2020, but UK firms face competitive disadvantages against EU-based rivals. Some exporters are pivoting to ports in the Netherlands or Belgium, where similar exemptions persist, yet this rerouting adds 100-200 km to journeys, inflating fuel costs by 10-15% and exposing vulnerabilities to channel disruptions like weather or strikes. Broader EU reforms, such as the €3 flat customs duty on low-value parcels from July 2026, compound pressures on small consignments, potentially reshaping e-commerce flows from non-EU origins.

Surprising data reveals uneven adoption: While France processes 40% of UK-EU road freight, only 20% of affected businesses had alternative plans by late 2025, per industry surveys. Trade-offs include short-term cost spikes versus long-term resilience; for instance, direct VAT registration enables deferred payment schemes but demands quarterly filings and audits, straining smaller operations.