Is it possible to avoid paying import VAT when dropshipping?

Dropshipping today offers a dynamic landscape, with all the possibilities of setting up an e-commerce store without physical stock. Value-added tax (VAT) obligations: this is the most important question for any entrepreneur. Do you have to pay VAT when selling electronically?

To operate as a dropshipper, you can choose from a number of different statutes for an e-business. The autoentrepreneur status allows you to benefit from VAT exemption on dropshipping imports. How to avoid paying import VAT when dropshipping? This guide explains in detail all the techniques you need to optimize VAT for your store and ensure the long-term future of your online business. Focus on! 

Mastering the principle of VAT on dropshipping imports

Dropshipping is an e-commerce activity that enables online retailers to sell their products more effectively. You don't have to stock products, and so you don't need a substantial start-up fund. All you need is a site to sell your goods. Like other online retailers, dropshippers must pay VAT and customs duties if they source goods from a supplier based outside the European Union. 

How can I avoid paying VAT when dropshipping? This is a possibility that can be considered, provided that you are familiar with and master the principle of dropshipping and VAT. First of all, it's essential to understand when you have to pay VAT and customs duties. However, since 2021, dropshippers have been liable to pay VAT, but not customs duties, which will be paid by their customers. 

When a retailer orders products from EU countries, he will not have to pay any tax, and his customer will be invoiced according to his country's tax rate. The reverse charge mechanism comes into play. But only if his company is also registered in the EU. On the other hand, when he uses a supplier from outside the European Union, i.e. dropshipping, his goods will essentially go through customs. 

What are the new VAT rules for dropshipping? 

VAT rules for dropshipping in Europe have changed considerably in 2021, with the aim of strengthening tax control and simplifying procedures for cross-border sales. These new regulations mainly affect dropshipping companies selling products to customers in different European Union (EU) countries.

Here are the main changes to bear in mind:

• Vendors must now charge VAT from the first euro of sale on imported goods, even for values under €150. This includes non-European suppliers.
• The creation of a one-stop shop enables dropshippers to declare and pay VAT for all intra-EU sales via a single online platform.
• For products imported from non-European countries, VAT is collected directly by customs on importation into France or another EU member state.

These new rules enhance transparency and facilitate tax management for companies involved in cross-border e-commerce.

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Avoiding VAT legally when dropshipping: some possibilities 

To avoid customs duties when dropshipping, you need to register in the EU and carry out your transactions in Europe. VAT problems arise mainly when you use a supplier who is not located in an EU country, but in a non-EU country. When you place your order in Asia, for example, you'll have to deal with customs and VAT issues. Unlike orders from Spain or Germany, for example. 

If you have a status other than self-employed, you may want to know the tricks to avoid paying import VAT when dropshipping. 

• Buying goods in small packages 

This is a legal and very simple option that allows you to avoid customs fees. You can make your orders in small packages rather than in large ones. This is so that you don't quickly cross the €150 threshold. However, this may mean that you have to pay transport costs on a recurring basis. 

• Ordering products on foreign platforms

To avoid taxes, you can also order your goods via foreign platforms. These include Alibaba and AliExpress. However, make sure that the price of a parcel does not exceed 150 euros. In this case, the product may be more expensive than if you buy it in an EU country with customs duties and other taxes. 

• Shopping from a European warehouse 

Various companies already allow you to take advantage of this possibility. You will have imported goods, but via a warehouse in Europe. This means that there is an intermediary who takes care of shipping the goods from the exporting country. 

• Not stating the exact value of its products 

Another trick is not to mention the exact price, even if it is not legal. By indicating a false value, one will thus deceive the customs. Since customs will not be able to determine the price of the goods if they do not open the package, this can be considered. However, this presents a significant risk that should not be minimised.

Is tax relief for dropshipping a solution?

Tax rescript is a procedure enabling a company or dropshipper to obtain an official response from the tax authorities concerning the application of VAT rules to its activity. However, this procedure does not enable dropshippers to avoid VAT altogether, but it can provide legal clarification for certain complex situations.

Here are just a few of the advantages of a dropshipping tax ruling:

• It helps secure the tax situation by validating the compliance of sales and import practices with VAT rules in France and other European countries.
• The rescript may enable you to benefit from a special regime, particularly for sales of products with a low value or below a certain amount.
• It can also clarify the relationship between dropshipper, suppliers and customers, to avoid any misapplication of taxes.

Although tax rescripts do not guarantee VAT exemption, they do provide a solid legal framework for optimizing the management of customs duties and charges in e-commerce.

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How are distance sales of imported goods affected by the new VAT rules?

Since 2021, new VAT rules in Europe are profoundly changing the way dropshippers manage their remote sales of imported goods. These changes directly affect companies that import products into the European Union.

Here are the main impacts:

• VAT is now applicable from the moment of sale, even for goods worth less than €150. This eliminates the former exemption.
• Dropshippers have to charge VAT to the customer when purchasing on their e-commerce platform, thus increasing product prices for consumers.
• For import sales, customs duties may also be added, depending on the value of the goods.
• Companies must declare VAT in the customer's country as soon as the annual distance-selling threshold is reached, making tax formalities more complex.

These new rules are designed to provide a better framework for online commerce and ensure fairer competition between European and non-European sellers.

Paying VAT in dropshipping as an entrepreneur

If you position yourself as a dropshipping product importer and operate as an autoentrepreneur, you are not generally liable for VAT. The procedures for setting up a business as an autoentrepreneur are particularly streamlined in order to encourage young people and project owners to start up. 

VAT on dropshipping imports for a self-employed entrepreneur is, in principle, paid by the end customer or the service provider handling the delivery. However, a dropshipping autoentrepreneur may be liable for VAT if his sales exceed a certain threshold. In this case, they will have to charge 20% VAT on all sales. 

In order to know more about this, you need to know about import duties for dropshipping. These are customs duties and VAT. These values can have an impact on your sales and therefore on your turnover. 

How does the structure of my business affect VAT in dropshipping?

The structure of your business plays a key role in managing VAT in dropshipping. Depending on your legal status and the country in which you operate, your tax obligations may vary.

• If you're a company based in France or another EU country, you'll generally need to collect and declare VAT on sales to your EU customers, according to local tax rules.
• A company registered outside the EU can benefit from VAT exemption on certain low-value products sent to European countries, but it will have to comply with the distance-selling thresholds imposed by each country.
• Using a third-party dropshipping platform can make VAT management easier, as these tools often automate the calculation of taxes and the sending of information to customs authorities.
• Good management of your structure can also reduce customs costs and optimize the price of your products.

How can dropshippers reclaim import VAT?

Dropshippers can reclaim import VAT by applying several strategies. Firstly, by registering for the French VAT self-liquidation scheme, companies can declare the tax at the time of sale, without advancing it to customs when the goods are imported. This reduces costs and optimizes operations.

Secondly, working with platforms or suppliers that facilitate VAT recovery via tax management tools can also lighten the administrative burden. Finally, certain specific rules apply to distance selling within the European Union, enabling you to benefit from more favorable regimes depending on the value and country of purchase.

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Conclusion 

Avoiding import VAT when dropshipping is generally not possible, as tax rules require the collection of this tax on imported goods. However, certain strategies, such as self-liquidation or the use of specific regimes for low-value goods, enable dropshippers to reduce or defer these charges. It is therefore essential to comply with the customs regulations of each country, and to manage your operations properly. Minea is a search tool for some of dropshipping's most popular products, enabling you to leapfrog your competitors. Fast and intuitive, it saves you time and can be used on any device. An infinite source of winning products, it lists all Facebook ads, influencer product placements and more. 

FAQ: Frequently Asked Questions 

How do I reclaim import VAT?

To reclaim import VAT, dropshippers must submit a tax declaration to customs. If VAT is paid on importation, it is essential to keep all proof of payment for tax deductions. In France, companies must also complete specific formalities to benefit from the VAT recovery scheme.

How to declare dropshipping?

When a dropshipper makes online sales, it must declare its sales on its VAT return, and indicate which products are imported. In France, each company must comply with tax rules and fill in a specific form to declare its remote sales, taking into account the taxes applicable according to the country of sale.

Do I need a VAT number for dropshipping in the UK?

Yes, if you generate sales above the UK VAT threshold, you need to register for a VAT number. This is essential to manage sales tax and meet tax obligations as a dropshipper operating in the European Union or internationally.

How do I make money with dropshipping?

To get paid in dropshipping, we recommend using secure payment platforms such as PayPal or Stripe. These solutions enable sellers to receive payments from customers quickly, while offering protection against fraud. It's also advisable to set prices including VAT charges to avoid tax complications.