Tax refunds for dropshipping: what do I need to know?

In France, as in many other countries, dropshipping is an increasingly popular practice. With this sales system, the e-merchant does not have to worry about logistics. He only has to promote the products of his wholesaler on his online shop. The products to be marketed can come from different platforms such as Amazon, Alibaba, eBay, etc. In dropshipping, it is important to calculate the VAT and duties that apply.

Dropshipping and VAT: what you need to know about it

Dropshipping and VAT are two issues that concern many dropshippers. 

• Changes from 1 January 2021 

It's worth noting that the Finance Act for 2020 introduced various changes to the VAT regime for dropshipping and e-commerce. The majority of these provisions came into force on January 1, 2021. 

From that date, e-commerce platforms are presumed to have obtained and delivered products which they facilitate for sale. 

• Rules applicable to e-commerce platforms 

There are various parameters to take into account:

• For annual sales in excess of 10,000 euros: in such cases, the sale will be treated as a sale made in France. The merchandise will be taxed at 20% VAT.
• For annual sales in excess of 10,000 euros: the sale will fall under the jurisdiction of the local consumer's state of residence. The customer will be required to pay VAT in his state of residence. Alternatively, the dropshipper may request that the sale be submitted in France. VAT will be charged at a rate of 20%. The company must be located in France. 
• The "one-stop shop" system: this applies to distance sales taking place within the European Union. In this case, VAT is payable to a state other than that of the supplier. Businesses have the option of paying VAT in a single Member State. This applies regardless of the country of taxation. For example, VAT may be due in Spain. To pay and declare the tax from France, the dropshipper will only have to identify himself at the counter. 

• What about dropshipping platforms?

As of 1 January, dropshipping platforms selling goods imported from third countries to customers in France must pay import VAT on behalf of the customer. As a result, the dropshipper will be liable for VAT on distance sales of imported goods worth less than €150. 

To prove that he has paid VAT, he is required to use a transaction record. This document must be kept for a period of 10 years from the year in which the transaction took place. It may be subject to inspection by the tax authorities.

The two optional VAT regimes for sales of imported goods with a value of more than €150. 

There is a new electronic shop. This is the Import One Stop Shop (IOSS). It is used when the import VAT is exempt or the VAT due in the Member State of the receiving customer is obtained through this shop. In order to benefit from this scheme, it is necessary for the dropshipper to have a specific VAT identification number designed for this scheme. 

If the final customer is located in France and the importing state is also the final destination, a specific declaration procedure will have to be followed. In this situation, the distance selling will be seen as a single import. It will be considered that it is the recipient customer who has taken charge of the import. He will have to pay the VAT relating to the transport and the passage through customs. 

According to the 2020 Finance Act, if a seller uses a platform that fails to collect VAT, the platform in question will be liable for the tax. In such circumstances, the tax authorities will be able to issue a formal notice and force the platform to pay.

Does the dropshipper have to pay customs duties?

The dropshipper is an intermediary in the sale. As such, the dropshipper will not be considered liable for customs duties. It is up to the end customer to pay them. For customers in France (metropolitan and overseas departments), it is not necessary to pay customs duty. In order to benefit from this right, it is necessary for the goods to come from a Member State of the European Union. However, if the goods come from a country outside the European Union, such as China, a customs duty must be paid if the goods are worth more than 150 euros.

It is up to the carrier to deal with customs formalities. He will be responsible for declaring the parcels and paying the customs duties if the goods cost more than 150 euros. When the carrier gives the package to the final customer, he will give him an invoice. The customer will have to pay the various duties.

Conclusion

Have you started dropshipping? This e-commerce system is advantageous because it doesn't require you to build up a stock of products. However, you will need to follow certain customs procedures. Consumers will then have to pay taxes. When marketing a specific product on your site, offer winners. That way, you'll be sure to attract a good clientele. Minea can help you find the winning products easily.