When buying a product outside the EU, it is possible to buy tax-free. What about dropshipping? How do I get tax-free treatment in the European Union? How do I get tax free in France? These are some of the questions we will try to answer.
Understanding how dropshipping works
Zero-rating is a process whereby the state refuses to collect taxes on imported goods. In general, it is a mechanism to favour a particular trade sector. The tax-free procedure has been simplified with PABLO, an application allowing remote procedures for independent traders.
The term 'tax-free' is often used in the tourist trade when a non-resident person spends a holiday in an EU country and purchases goods. This exemption is subject to certain conditions.
The zero-rating of dropshipping and VAT also follows more or less the same principles. In order to take advantage of the tax exemption within the European Union, there are certain eligibility requirements that must be met. If you are a dropshipper residing in a country outside the EU, zero-rating has significant advantages. In particular, it allows you to benefit from a VAT refund on purchases you make within the EU. To take advantage of this zero-rating, you must sell the product in your country of residence.
Who are the beneficiaries of the dropshipping tax?
How do you apply for zero-rating in France and who are the beneficiaries? To claim a VAT refund on purchases you make in France, there is a minimum amount to spend. This used to be set at €175.01 including VAT, but this has changed since 1 January 2021 and is now set at €100.01 including VAT for your purchases. This minimum tax-free amount in France has therefore been lowered. Previously, consumers had to buy with this minimum amount for the whole day, but now they have 3 days.
- The modalities of the tax exemption in France
This amount is the minimum required for you to have a tax-free slip. Without this official document, you will not be able to reclaim your VAT. The efforts of French customs are palpable in making tax-free shopping more and more accessible. The tax-free rate in France is approximately 12% of the amount including VAT. However, it can vary from one trader to another.
- The beneficiaries of the dropshipping tax
In the case of dropshipping activities, numerous reforms have taken place to prevent fraud and better regularize the situation of the various e-commerce players. As for the beneficiaries of the dropshipping tax exemption, it essentially concerns those who have registered as autoentrepreneurs. A few criteria must also be met:
- You must be resident in a non-EU country,
- Your stay in France must not exceed 6 months,
- You are over 16 years old,
- You must have a valid passport or identity card and others.
Steps to benefit from the tax exemption
A zero-rating application is much the same as a VAT refund. In particular, you must ask the trader for a form at the time of purchase. The customer must have the form validated by customs. The form must contain a barcode and the PABLO logo.
As zero-rating can only be applied to retail sales, you cannot make a commercial order. For your dropshipping business, you must therefore proceed by ordering small packages.
Towards the end of the tax exemption in dropshipping
Dropshipping has its own particularities in terms of VAT recovery. As the delivery is often not made by the exporter, he is in most cases exempt from VAT. When a dropshipper orders his goods from a supplier located outside the European Union, he will not be able to reclaim the VAT on his purchases.
However, you should take into account the changes that have been made to VAT in dropshipping. Before 1 July 2021, all goods under €22 were not taxable. In particular, this threshold has been removed to make way for an IOSS one-stop shop where all sales from outside the EU will be made. VAT will now be charged on all parcels valued at less than €150.
For the dropshipper, as he does not manage the stocks or the delivery, he will not be responsible for the tax. The VAT will be charged to the customer according to the conditions applied in the country where the delivery takes place. But in order to benefit from these new provisions, you must first register with IOSS. IOSS will take care of your VAT payment or declaration on your behalf.
Minea is a platform that allows you to search for the most popular dropshipping products. This will give you an edge over your competitors. It presents you with products that are updated daily. Use it to avoid unprofitable subscriptions and grow your dropshipping business.