Now very popular in France, dropshipping is a commercial activity that makes it easier to earn money. However, like all commercial activities, it is not exempt from VAT. How do you calculate the VAT payable on dropshipping products? Here are the answers to help you calculate the VAT on your e-commerce and dropshipping business.
Looking at the details of VAT application in dropshipping
How does VAT apply in dropshipping? This is one of the issues we need to address before we can calculate dropshipping VAT. The question of dropshipping and VAT is not the easiest one to understand. You can always choose to be accompanied by an expert or a professional coach.
Before looking at the application of VAT in dropshipping, we need to look at the concept of dropshipping. What makes it so special? In dropshipping, the seller, i.e. the one who owns the e-commerce site, does not have a stock of the goods. This is managed by the supplier. It is the latter who will take care of the delivery. The dropshipper will not therefore manage the purchase of the stock and all the logistics.
In this context, VAT in dropshipping has some particularities. It only applies when using the services of a supplier outside the European Union. However, when the goods pass through French customs, it is the end customer who has to pay all the customs fees. Does this mean that the dropshipper is not liable for VAT? In reality, it is not as simple as it may seem. The important thing is to know how to choose the VAT-free regime.
Calculating VAT in dropshipping
The calculation of VAT in dropshipping depends on several elements. In particular, it may be a question of the supplier, especially if there are several. The question to ask is: is it located in Europe or outside the EU? It can also be both. The taxation arrangements will indeed be different. Delivery to a non-EU customer is also a different matter. VAT is not recoverable on all purchases, among other things.
To find out how much tax you'll have to pay when dropshipping in 2022, and to correctly calculate the percentage of tax you'll have to pay for each product, we recommend you consult the French customs tariff schedule.
Be aware of the possibility of not paying VAT when dropshipping
One of the questions that tickles dropshippers: is it possible to avoid paying VAT when dropshipping? There are a few tricks you can use to avoid paying VAT when dropshipping. The reason why consumers are increasingly opting for products sold on foreign sites, i.e. sites outside the EU, is that the prices displayed are particularly affordable.
However, this very low cost can rise with the various taxes (customs, VAT). In the end, it can be more expensive than if you were to buy the products in Europe. As an importer, you need to look a little more into the subject of VAT in dropshipping. VAT applies mainly when you place your orders in countries outside the EU. When you choose to source your stock in Europe, you will have no problems with customs and therefore less worries about taxes.
One simple and entirely legal technique you can adopt to avoid customs is to order many small packages. Often, larger orders involve higher customs fees. The price of each product, for example, should not exceed 22 euros. The only disadvantage of this method is that you will have to pay the shipping costs several times.
Paying attention to the basic rules of dropshipping and VAT
In France, a dropshipping company or any e-commerce activity is subject to VAT when the goods come from another country outside the EU. This may include China or Japan. When you start such a business, you need to be fully aware of the dropshipping and VAT rules.
- Your general terms and conditions of sale must formally stipulate the tax and customs clauses and those relating to the price and the online contract,
- You must specify who will be the importer of the product,
- You need to know whether the consumer knows the identity of the supplier,
- You must state the terms and conditions in relation to online orders by the customer, as well as the display of prices for each item.
In terms of VAT in dropshipping in France, the most important thing to remember is that the law states that this VAT must be paid by the recipient of the goods. The dropshipping company does not manage the stock or the delivery either.
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