Dropshipping in 2022: how to calculate VAT

Now very much in vogue in France, dropshipping is a business 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 some answers to help you calculate the VAT payable on your e-commerce and dropshipping business. 

Looking at the details of VAT application in dropshipping

How is VAT applied in dropshipping? This is one of the questions we need to answer before we can calculate dropshipping VAT. The question of dropshipping and VAT is not the easiest to understand. You can always choose to be accompanied by an expert or a professional coach. 

Before we look at the application of VAT in dropshipping, we need to go back to the concept of dropshipping. In dropshipping, the seller - i.e., the owner of the e-commerce site - has no stock of the merchandise. This is managed by the supplier. The supplier is responsible for delivery. The dropshipper will therefore not manage the purchase of the stock and all the logistics involved. 

In this context, VAT for dropshipping presents a number of particularities. It only applies when using the services of a supplier outside the European Union. But when the goods pass through French customs, it's the end customer who has to bear all customs costs. Does this mean that dropshippers are not liable for VAT? In reality, it's not as simple as it sounds. The important thing is to know how to choose the VAT-free regime. 

Calculating VAT in dropshipping

Calculating VAT for dropshipping depends on a number of factors. In particular, it may depend on the supplier, especially if there is more than one. The question to ask is: is it located in Europe or outside the EU? It can also be both. The tax arrangements will indeed be different. Delivery to a customer outside the EU is another matter. Among other things, VAT is not recoverable on all purchases.  

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 most dropshippers ask themselves: is it possible to avoid paying VAT when dropshipping? There are a few tricks you can use to avoid paying VAT when dropshipping. If consumers are increasingly opting for products sold on foreign sites, i.e. sites outside the EU, it's because 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. 

Conclusion 

Minea is a powerful platform that you can turn to if you are looking for the best products for dropshipping. It scans all social networks so that you don't miss out on the hottest products of the moment. This trendy product search tool offers Lite and Premium subscription options to choose from according to your needs.

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