How to Record a DDP Sale Where the Seller or Logistics Provider Absorbs Import Duties
Recognizing full revenue on a DDP (Delivered Duty Paid) sale and separately expensing the import duties absorbed by the seller.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Accounts Receivable | Asset (+) | 1,160.00 | - |
| Sales Revenue | Revenue (+) | - | 1,000.00 |
| Import Duty Expense | Expense (+) | 160.00 | - |
💡 Accountant's Note
In DDP shipments, the logistics provider or seller absorbs the import tax. Unlike a pass-through, the duty is a direct operating expense of the sale.
Practitioner & Systems Framework
💻 ERP Architecture
Under DDP (Delivered Duty Paid) Incoterms, the seller or logistics provider is responsible for all costs including import duties and taxes at the destination. The client pays the full DDP price (inclusive of duties); the logistics provider pays the duty authority and expenses it. This is the opposite of the agency pass-through model (logistics-customs-duties-agency-pass-through) — under DDP, the duty is genuinely the seller's cost, not the client's. Present gross: full revenue at the DDP price, and duty as an operating expense. Track DDP duty costs carefully — unexpected duty rate changes or mis-declared HS codes can significantly compress margin on DDP sales.
⚠️ Audit Flags
Auditors verify the DDP Incoterm is confirmed in the commercial invoice and the contract of sale — without clear documentation, the duty treatment may be disputed. For customs compliance, the import declaration must be filed by a licensed customs broker in the destination country. Errors in HS code classification that result in under-payment of duty create a retroactive duty liability plus penalties — the seller bears these costs under DDP.
📄 Required Documentation
Commercial invoice (DDP Incoterm stated), contract of sale, import customs declaration (filed in the destination country), duty assessment and payment receipt, Import Duty Expense entry, Sales Revenue recognition, customs broker appointment in the destination country, and HS code classification confirmation.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.