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What is the EU VAT on Dropshipping?

Views: 421     Author: Site Editor     Publish Time: 2021-06-22      Origin: Site


We know that cross-border dropshipping is a new type of online business model. It will relate to EU VAT if drop shipping sellers export products to EU. Here we will talk about some knowledge of EU VAT for dropshipping, and we hope that it is helpful for some people who want to run dropshipping business. 


drop shipping sellers 

What Is EU VAT?

Value Added Tax (VAT) refers to the tax collected by the importer from consumers on behalf of the State Taxation Bureau when selling goods or providing services in EU countries or importing goods from abroad into the EU. It is the price of goods Tax on profits.


VAT is composed of two separate taxes, Import VAT and Sales VAT. When the goods enter the EU, the goods are subject to import value-added tax; when the goods are sold, the import value-added tax can be refunded, and then the corresponding sales value-added tax is paid according to the sales.



European VAT Operation Process

We know that value-added tax is a tax levied on consumer spending. It is collected by registered sellers of value-added tax on their sales in Europe, and paid to the national tax agency through a value-added tax declaration.


Which Business Activities Require VAT Registration?

1. Use Amazon fulfillment centers or overseas warehouses in EU. Sometimes e-commerce dropshipping business will use overseas warehouse to send goods to drop shipping buyers.

2. Selling goods to individual sellers in EU countries exceeds distance sales. That is to say, sellers sell products in stock in one EU country to consumers in another country. But the situation where products are sent from China to consumers in a certain EU country is not considered "distance sales."

3. Import goods to EU.

4. Selling goods to corporate sellers in EU countries.

5. Transport goods between operation centers in different countries.


cross-border dropshipping

What Are the Requirements For VAT and Customs Deduction? 

1. Import and export enterprises registered in European countries.

2. Have a fixed place of business in Europe.

3. Have an offshore foreign exchange bank account and sign a tax deduction agreement with the State Administration of Taxation.

4. Have a fixed contact person and phone number to confirm tax payment and customs clearance.

5. There is an EORI tax number.

Only when the above conditions are met, the seller can use the VAT number to clear customs and pay import value-added tax. Of course, many companies nowadays do not apply for their own VAT tax number, but use the VAT tax number provided by the freight forwarder to clear customs. This means that the VAT tax number of the forwarder is used, and the import VAT is paid by the forwarder.



For cross-border dropshipping business, the important thing is to determine the place of supply of the products, which is to determine whether VAT will be charged or not. For example, when direct dropshipping products are shipped from China to France. That is to say, drop shipping products enter the EU and the place of supply of the products is China. 

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