Dropshipping and VAT in 2021: all the changes to remember

New entrepreneurs are increasingly attracted to dropshipping, a modern way of managing the logistics of shipping products in online sales. The dropshipping expert carries out his tasks between the supplier, the reseller and the customer. As with any commercial activity, there is indeed the issue of VAT. What about VAT in dropshipping for 2021? 

The different taxes of your dropshipping business

When you decide to become a dropshipper, you will essentially be operating as a self-employed entrepreneur. This status is the most accessible and allows you to start your business quickly. It also gives you the opportunity to anticipate changes in your market. It also allows you to benefit from a particularly advantageous tax system.

If you are part of this scheme, you will undoubtedly pay all social security contributions and income tax to the URSSAF. The amount you have to pay will be calculated as a percentage of your turnover. Apart from these taxes, you will also have to pay consumption taxes. These are often considered when purchasing a good or service. 

One of the taxes you have to pay is VAT. It is important to know that this VAT will be charged to the end customer. In dropshipping, VAT has benefited from some exceptions. The dropshipper, as an e-tailer, could specify on his website that he does not take care of the shipping, storage or delivery of the products. It will therefore be the end customer who will be the importer of the product. What you need to understand is that with these conditions, there will be no VAT in dropshipping. 

The VAT system for dropshipping before 2021 

In order to better understand the developments in dropshipping and VAT, it would make sense to recontextualise it a little. Prior to 31 December 2020, when a dropshipper had to sell products from outside the European Union, this was considered an external transaction. This meant that the dropshipping business in France did not have to collect VAT from the end customer. However, a self-employed dropshipping business did owe VAT when the goods entered the country of the importer who is always the end customer. That said, as the market value of the products is particularly low, dropshipping customs duties and VAT are often omitted. 

Some older EU VAT rules are not complete either, which has allowed non-EU dropshipping experts to have some advantages compared to their European competitors. These include a VAT exemption for all imported items under €22. Thanks to this exemption, e-tailers outside the EU could still charge VAT. There is also the VAT registration threshold, which is not the same from one EU country to another. 

Some of the reforms applied from 1 July 2021

New measures have been applied since 1 July 2021 with regard to dropshipping and its VAT. In particular, you should know: 

  • That there are no longer any VAT thresholds: 

The distance selling thresholds for the sale of products have been abolished. There is now a single threshold of €10,000. A dropshipper can therefore expand his sales internationally without having to worry about VAT. You will charge VAT in the same way, regardless of the buyer's country.   

  • A one-stop shop for VAT returns:

For all EU Member States, there will be a single window for the declaration and payment of VAT. All e-traders can use this window for intra-EU distance selling (commercial transactions between EU member states) and distance selling of products from outside the EU not exceeding €150. 

The reasons for these new measures 

Several objectives are being pursued in this VAT reform for dropshipping. So that the problem of how to pay VAT in dropshipping is no longer an obstacle for entrepreneurs, measures have been taken. They aim to regularise the procedures related to the import and all dropshipping activities that pay VAT. 

The main purpose of these changes to the VAT payment of dropshipping self-employed entrepreneurs is to simplify the formalities. These include those that take place between European countries. The reforms are also intended to combat fraud in online sales between different countries. In order to ensure fair competition, new rules had to be put in place. 

VAT dropshipping and customs are easy to understand unless you take the time to analyse them. However, in order to better understand them, you can always choose to be accompanied. 

Conclusion 

In order to better control the explosive growth of e-commerce, these VAT reforms for dropshipping have been undertaken. They have a direct effect on every business in the supply chain. In order for your e-commerce business to flourish further, it is important to be aware of them. Platforms such as Minea help you to find the winning product easily.

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