Mastering Dropshipping VAT
Dropshipping Tax
Author:
September 5, 2025
Contents
What exactly is dropshipping VAT? If you sell online, you’ve likely heard about VAT, but understanding how it works in dropshipping can be tricky. Who pays it? When should you charge it? How to avoid costly mistakes?
This guide covers all you need to know about dropshipping VAT Europe and beyond. You’ll learn the key rules, how to calculate and file VAT returns easily, with the best strategies to handle your tax obligations without hassle. Whether you're new to selling or a seasoned expert, this guide makes VAT regulations easy to understand.
What is VAT in Dropshipping?
If you’re into dropshipping, VAT is a topic you just can’t overlook. It’s a consumption tax used in many countries, especially within the EU, and applies to most business transactions. But with different rules in each country and unclear VAT obligations for e-commerce sellers, it’s easy to get lost.
Simply put, as a dropshipper, VAT evolves around three key points:
Collected VAT: The VAT you charge customers on each sale, which must be sent to tax authorities.
Paid VAT: You pay VAT when buying from suppliers, when applicable in their country.
Import VAT: When a product arrives in a country, import VAT may be charged, either to you or the end customer.
The issue is that your VAT obligations depend on where your customers and suppliers are located. You need to know when your dropshipping VAT applies, at what rate, and how to manage it properly to avoid errors and boost your profit margin.
To get a full overview of VAT rules in Europe, the European Commission details the obligations of e commerce businesses based on their country and annual sales threshold.
How does VAT apply to chain transactions?
A chain transaction happens when a VAT-eligible product is sold through at least three parties involved: the supplier, the intermediary, and the final customer. In most cases, the goods go straight from the supplier to the final customer.
In dropshipping, the final customer is a private buyer. Dropshipping VAT rules depend on several factors like company turnover, product type, customer’s country, and whether the sale is local or international.
For sales within the same country:
When Supplier (A) sells to Intermediary (B), VAT may apply or it might applied a reverse charge.
When B sells to the final customer, regular VAT is always applied.
If the intermediary is not based in the destination country, it must register for VAT.
Cross border transactions are more complex, which we’ll explore in detail in the next sections.
Who pays the Dropshipping VAT?
This varies based on your location, customers and annual turnover.
1. Your Location and Your Customers’ Locations
If you sell to private customers within the EU and your annual sales exceeds €10,000, you should charge VAT at the customer’s local tax rates.
Below this threshold, you may apply your own country’s VAT rates. The €10,000 threshold was introduced across the EU in July 2021 to make VAT treatment easier for small businesses.
2. Your Legal Business Status
Sole traders in France enjoy a VAT exemption if their annual turnover stays below €91,900.
Registered companies must charge and file VAT return from their first euro.
3. Product Shipping Locations
If products are shipped from non EU countries (e.g., China), import VAT can be applied.
Since July 2021, all imports into the EU are subject to VAT, even those below €22, to reduce fraud and ensure fair tax on imported goods.
What exactly is dropshipping VAT? If you sell online, you’ve likely heard about VAT, but understanding how it works in dropshipping can be tricky. Who pays it? When should you charge it? How to avoid costly mistakes?
This guide covers all you need to know about dropshipping VAT Europe and beyond. You’ll learn the key rules, how to calculate and file VAT returns easily, with the best strategies to handle your tax obligations without hassle. Whether you're new to selling or a seasoned expert, this guide makes VAT regulations easy to understand.
What is VAT in Dropshipping?
If you’re into dropshipping, VAT is a topic you just can’t overlook. It’s a consumption tax used in many countries, especially within the EU, and applies to most business transactions. But with different rules in each country and unclear VAT obligations for e-commerce sellers, it’s easy to get lost.
Simply put, as a dropshipper, VAT evolves around three key points:
Collected VAT: The VAT you charge customers on each sale, which must be sent to tax authorities.
Paid VAT: You pay VAT when buying from suppliers, when applicable in their country.
Import VAT: When a product arrives in a country, import VAT may be charged, either to you or the end customer.
The issue is that your VAT obligations depend on where your customers and suppliers are located. You need to know when your dropshipping VAT applies, at what rate, and how to manage it properly to avoid errors and boost your profit margin.
To get a full overview of VAT rules in Europe, the European Commission details the obligations of e commerce businesses based on their country and annual sales threshold.
How does VAT apply to chain transactions?
A chain transaction happens when a VAT-eligible product is sold through at least three parties involved: the supplier, the intermediary, and the final customer. In most cases, the goods go straight from the supplier to the final customer.
In dropshipping, the final customer is a private buyer. Dropshipping VAT rules depend on several factors like company turnover, product type, customer’s country, and whether the sale is local or international.
For sales within the same country:
When Supplier (A) sells to Intermediary (B), VAT may apply or it might applied a reverse charge.
When B sells to the final customer, regular VAT is always applied.
If the intermediary is not based in the destination country, it must register for VAT.
Cross border transactions are more complex, which we’ll explore in detail in the next sections.
Who pays the Dropshipping VAT?
This varies based on your location, customers and annual turnover.
1. Your Location and Your Customers’ Locations
If you sell to private customers within the EU and your annual sales exceeds €10,000, you should charge VAT at the customer’s local tax rates.
Below this threshold, you may apply your own country’s VAT rates. The €10,000 threshold was introduced across the EU in July 2021 to make VAT treatment easier for small businesses.
2. Your Legal Business Status
Sole traders in France enjoy a VAT exemption if their annual turnover stays below €91,900.
Registered companies must charge and file VAT return from their first euro.
3. Product Shipping Locations
If products are shipped from non EU countries (e.g., China), import VAT can be applied.
Since July 2021, all imports into the EU are subject to VAT, even those below €22, to reduce fraud and ensure fair tax on imported goods.
What exactly is dropshipping VAT? If you sell online, you’ve likely heard about VAT, but understanding how it works in dropshipping can be tricky. Who pays it? When should you charge it? How to avoid costly mistakes?
This guide covers all you need to know about dropshipping VAT Europe and beyond. You’ll learn the key rules, how to calculate and file VAT returns easily, with the best strategies to handle your tax obligations without hassle. Whether you're new to selling or a seasoned expert, this guide makes VAT regulations easy to understand.
What is VAT in Dropshipping?
If you’re into dropshipping, VAT is a topic you just can’t overlook. It’s a consumption tax used in many countries, especially within the EU, and applies to most business transactions. But with different rules in each country and unclear VAT obligations for e-commerce sellers, it’s easy to get lost.
Simply put, as a dropshipper, VAT evolves around three key points:
Collected VAT: The VAT you charge customers on each sale, which must be sent to tax authorities.
Paid VAT: You pay VAT when buying from suppliers, when applicable in their country.
Import VAT: When a product arrives in a country, import VAT may be charged, either to you or the end customer.
The issue is that your VAT obligations depend on where your customers and suppliers are located. You need to know when your dropshipping VAT applies, at what rate, and how to manage it properly to avoid errors and boost your profit margin.
To get a full overview of VAT rules in Europe, the European Commission details the obligations of e commerce businesses based on their country and annual sales threshold.
How does VAT apply to chain transactions?
A chain transaction happens when a VAT-eligible product is sold through at least three parties involved: the supplier, the intermediary, and the final customer. In most cases, the goods go straight from the supplier to the final customer.
In dropshipping, the final customer is a private buyer. Dropshipping VAT rules depend on several factors like company turnover, product type, customer’s country, and whether the sale is local or international.
For sales within the same country:
When Supplier (A) sells to Intermediary (B), VAT may apply or it might applied a reverse charge.
When B sells to the final customer, regular VAT is always applied.
If the intermediary is not based in the destination country, it must register for VAT.
Cross border transactions are more complex, which we’ll explore in detail in the next sections.
Who pays the Dropshipping VAT?
This varies based on your location, customers and annual turnover.
1. Your Location and Your Customers’ Locations
If you sell to private customers within the EU and your annual sales exceeds €10,000, you should charge VAT at the customer’s local tax rates.
Below this threshold, you may apply your own country’s VAT rates. The €10,000 threshold was introduced across the EU in July 2021 to make VAT treatment easier for small businesses.
2. Your Legal Business Status
Sole traders in France enjoy a VAT exemption if their annual turnover stays below €91,900.
Registered companies must charge and file VAT return from their first euro.
3. Product Shipping Locations
If products are shipped from non EU countries (e.g., China), import VAT can be applied.
Since July 2021, all imports into the EU are subject to VAT, even those below €22, to reduce fraud and ensure fair tax on imported goods.
What exactly is dropshipping VAT? If you sell online, you’ve likely heard about VAT, but understanding how it works in dropshipping can be tricky. Who pays it? When should you charge it? How to avoid costly mistakes?
This guide covers all you need to know about dropshipping VAT Europe and beyond. You’ll learn the key rules, how to calculate and file VAT returns easily, with the best strategies to handle your tax obligations without hassle. Whether you're new to selling or a seasoned expert, this guide makes VAT regulations easy to understand.
What is VAT in Dropshipping?
If you’re into dropshipping, VAT is a topic you just can’t overlook. It’s a consumption tax used in many countries, especially within the EU, and applies to most business transactions. But with different rules in each country and unclear VAT obligations for e-commerce sellers, it’s easy to get lost.
Simply put, as a dropshipper, VAT evolves around three key points:
Collected VAT: The VAT you charge customers on each sale, which must be sent to tax authorities.
Paid VAT: You pay VAT when buying from suppliers, when applicable in their country.
Import VAT: When a product arrives in a country, import VAT may be charged, either to you or the end customer.
The issue is that your VAT obligations depend on where your customers and suppliers are located. You need to know when your dropshipping VAT applies, at what rate, and how to manage it properly to avoid errors and boost your profit margin.
To get a full overview of VAT rules in Europe, the European Commission details the obligations of e commerce businesses based on their country and annual sales threshold.
How does VAT apply to chain transactions?
A chain transaction happens when a VAT-eligible product is sold through at least three parties involved: the supplier, the intermediary, and the final customer. In most cases, the goods go straight from the supplier to the final customer.
In dropshipping, the final customer is a private buyer. Dropshipping VAT rules depend on several factors like company turnover, product type, customer’s country, and whether the sale is local or international.
For sales within the same country:
When Supplier (A) sells to Intermediary (B), VAT may apply or it might applied a reverse charge.
When B sells to the final customer, regular VAT is always applied.
If the intermediary is not based in the destination country, it must register for VAT.
Cross border transactions are more complex, which we’ll explore in detail in the next sections.
Who pays the Dropshipping VAT?
This varies based on your location, customers and annual turnover.
1. Your Location and Your Customers’ Locations
If you sell to private customers within the EU and your annual sales exceeds €10,000, you should charge VAT at the customer’s local tax rates.
Below this threshold, you may apply your own country’s VAT rates. The €10,000 threshold was introduced across the EU in July 2021 to make VAT treatment easier for small businesses.
2. Your Legal Business Status
Sole traders in France enjoy a VAT exemption if their annual turnover stays below €91,900.
Registered companies must charge and file VAT return from their first euro.
3. Product Shipping Locations
If products are shipped from non EU countries (e.g., China), import VAT can be applied.
Since July 2021, all imports into the EU are subject to VAT, even those below €22, to reduce fraud and ensure fair tax on imported goods.
What exactly is dropshipping VAT? If you sell online, you’ve likely heard about VAT, but understanding how it works in dropshipping can be tricky. Who pays it? When should you charge it? How to avoid costly mistakes?
This guide covers all you need to know about dropshipping VAT Europe and beyond. You’ll learn the key rules, how to calculate and file VAT returns easily, with the best strategies to handle your tax obligations without hassle. Whether you're new to selling or a seasoned expert, this guide makes VAT regulations easy to understand.
What is VAT in Dropshipping?
If you’re into dropshipping, VAT is a topic you just can’t overlook. It’s a consumption tax used in many countries, especially within the EU, and applies to most business transactions. But with different rules in each country and unclear VAT obligations for e-commerce sellers, it’s easy to get lost.
Simply put, as a dropshipper, VAT evolves around three key points:
Collected VAT: The VAT you charge customers on each sale, which must be sent to tax authorities.
Paid VAT: You pay VAT when buying from suppliers, when applicable in their country.
Import VAT: When a product arrives in a country, import VAT may be charged, either to you or the end customer.
The issue is that your VAT obligations depend on where your customers and suppliers are located. You need to know when your dropshipping VAT applies, at what rate, and how to manage it properly to avoid errors and boost your profit margin.
To get a full overview of VAT rules in Europe, the European Commission details the obligations of e commerce businesses based on their country and annual sales threshold.
How does VAT apply to chain transactions?
A chain transaction happens when a VAT-eligible product is sold through at least three parties involved: the supplier, the intermediary, and the final customer. In most cases, the goods go straight from the supplier to the final customer.
In dropshipping, the final customer is a private buyer. Dropshipping VAT rules depend on several factors like company turnover, product type, customer’s country, and whether the sale is local or international.
For sales within the same country:
When Supplier (A) sells to Intermediary (B), VAT may apply or it might applied a reverse charge.
When B sells to the final customer, regular VAT is always applied.
If the intermediary is not based in the destination country, it must register for VAT.
Cross border transactions are more complex, which we’ll explore in detail in the next sections.
Who pays the Dropshipping VAT?
This varies based on your location, customers and annual turnover.
1. Your Location and Your Customers’ Locations
If you sell to private customers within the EU and your annual sales exceeds €10,000, you should charge VAT at the customer’s local tax rates.
Below this threshold, you may apply your own country’s VAT rates. The €10,000 threshold was introduced across the EU in July 2021 to make VAT treatment easier for small businesses.
2. Your Legal Business Status
Sole traders in France enjoy a VAT exemption if their annual turnover stays below €91,900.
Registered companies must charge and file VAT return from their first euro.
3. Product Shipping Locations
If products are shipped from non EU countries (e.g., China), import VAT can be applied.
Since July 2021, all imports into the EU are subject to VAT, even those below €22, to reduce fraud and ensure fair tax on imported goods.
What exactly is dropshipping VAT? If you sell online, you’ve likely heard about VAT, but understanding how it works in dropshipping can be tricky. Who pays it? When should you charge it? How to avoid costly mistakes?
This guide covers all you need to know about dropshipping VAT Europe and beyond. You’ll learn the key rules, how to calculate and file VAT returns easily, with the best strategies to handle your tax obligations without hassle. Whether you're new to selling or a seasoned expert, this guide makes VAT regulations easy to understand.
What is VAT in Dropshipping?
If you’re into dropshipping, VAT is a topic you just can’t overlook. It’s a consumption tax used in many countries, especially within the EU, and applies to most business transactions. But with different rules in each country and unclear VAT obligations for e-commerce sellers, it’s easy to get lost.
Simply put, as a dropshipper, VAT evolves around three key points:
Collected VAT: The VAT you charge customers on each sale, which must be sent to tax authorities.
Paid VAT: You pay VAT when buying from suppliers, when applicable in their country.
Import VAT: When a product arrives in a country, import VAT may be charged, either to you or the end customer.
The issue is that your VAT obligations depend on where your customers and suppliers are located. You need to know when your dropshipping VAT applies, at what rate, and how to manage it properly to avoid errors and boost your profit margin.
To get a full overview of VAT rules in Europe, the European Commission details the obligations of e commerce businesses based on their country and annual sales threshold.
How does VAT apply to chain transactions?
A chain transaction happens when a VAT-eligible product is sold through at least three parties involved: the supplier, the intermediary, and the final customer. In most cases, the goods go straight from the supplier to the final customer.
In dropshipping, the final customer is a private buyer. Dropshipping VAT rules depend on several factors like company turnover, product type, customer’s country, and whether the sale is local or international.
For sales within the same country:
When Supplier (A) sells to Intermediary (B), VAT may apply or it might applied a reverse charge.
When B sells to the final customer, regular VAT is always applied.
If the intermediary is not based in the destination country, it must register for VAT.
Cross border transactions are more complex, which we’ll explore in detail in the next sections.
Who pays the Dropshipping VAT?
This varies based on your location, customers and annual turnover.
1. Your Location and Your Customers’ Locations
If you sell to private customers within the EU and your annual sales exceeds €10,000, you should charge VAT at the customer’s local tax rates.
Below this threshold, you may apply your own country’s VAT rates. The €10,000 threshold was introduced across the EU in July 2021 to make VAT treatment easier for small businesses.
2. Your Legal Business Status
Sole traders in France enjoy a VAT exemption if their annual turnover stays below €91,900.
Registered companies must charge and file VAT return from their first euro.
3. Product Shipping Locations
If products are shipped from non EU countries (e.g., China), import VAT can be applied.
Since July 2021, all imports into the EU are subject to VAT, even those below €22, to reduce fraud and ensure fair tax on imported goods.
Reach $1,000 a day or your money back
Reach $1,000 a day or your money back
Reach $1,000 a day or your money back
Reach $1,000 a day or your money back
Reach $1,000 a day or your money back
Reach $1,000 a day or your money back
Why proper VAT treatment matters in Dropshipping?
Managing VAT correctly isn’t just about compliance—it’s also to prevent issues and optimize your e commerce business.
Avoid Tax Penalties: Incorrect VAT returns can lead to fines and financial audits.
Prevent Order Delays: Unpaid VAT or customs fees cause shipments delay and unhappy customers.
Maximize Profit Margins: By recovering dropshipping VAT on purchases when possible.
The OECD offers a detailed guide on VAT and consumption tax management for international businesses, explaining tax thresholds and reporting obligations in simple terms.
Types of Taxes in Dropshipping
VAT and Income Tax in Dropshipping
As a dropshipper, you should manage various taxes and customs duties. Unlike a regular shop with simpler taxes, dropshipping has specific tax obligations based on where you are registered and where your customers are.
Here are several factors to consider:
VAT (Value-Added Tax): Applied to dropshipping products in many countries, mostly in EU member states.
Income Tax or Corporate Tax: Depending on your legal status, you will be taxed on your business profits.
How VAT Works in Dropshipping?
Dropshipping VAT applies on products sales based on the final customer’s country. This means you must:
Charge local VAT if your EU sales exceed the €10,000 annual threshold.
Declare and pay VAT in each relevant country, unless you use the One Stop Shop (OSS) system that simplifies this process.
Comply with local VAT rates which vary from country to country:
France: 20%
Germany: 19%
Spain: 21%
For non EU countries, invoice rules differ. For instance, the United States does not have VAT but enforces sales tax on certain exceptions, which is applied at the state level.
How Income Tax Works in Dropshipping?
Income tax obligations depend on your legal status and country of residence.
For sole traders in France, dropshipping profits follow the micro-tax regime, with a flat 12.8% income tax plus 22% social charges.
If you run a limited company (e.g., SAS, SARL) you’ll pay a corporate tax, typically 15% for profits up to €42,500 and 25% above that. (Official source)
To optimize your taxes, it's vital to choose the right legal status and understand applicable tax rates.
Import VAT and Customs Duties
Managing dropshipping import tax is one of the toughest facets, mostly if you source products from non EU countries like China.
How Import VAT Works?
Since July 2021, all imports into EU countries are subject to VAT, no matter the value. This means that even a 10€ order on AliExpress can be taxed.
For goods under €150, VAT must be paid upfront or by the end customer upon delivery.
For goods over €150, customs duties may also apply.
The IOSS (Import One Stop Shop) system simplifies dropshipping VAT reporting for imported goods under €150.
Customs Duties in Dropshipping
Customs duties depend on the product's value and country of origin. Here are some general rules:
Products from China: Subject to customs duties starting at €150.
Products from an EU country: No customs duties, but dropshipping VAT applies.
Product Category: Some items, like electronic devices, may have additional dropshipping import tax.
To find out exactly how much you owe, you might want to try the official European customs simulator.
VAT Number for Dropshipping: Essential or Not?
A common question: Do I need a VAT number for dropshipping?
The answer depends on your sales volume (products sold) and business’s place.
When Is a VAT Number Required?
If you sell to European countries and exceed €10,000 annual turnover, you must be VAT registered to get a number.
If you store products in a warehouse in Europe (e.g., Amazon FBA in Germany), you must get a VAT number in this country.
If you sell to businesses in the EU, intra community shipment rules may apply.
How to Obtain a VAT Number ?
Well, the VAT registration varies across countries:
In France: you must apply through the business tax branch, also called Service des Impôts des Entreprises (SIE).
For dropshipping Germany tax: you register via the Federal Tax Office.
If you sell in multiple EU countries, you can use the One-Stop Shop (OSS) to file VAT returns in a single member state.
Key Takeaways: Managing VAT in Dropshipping
Type of Tax | When it applies ? | Who Pays? | Rate |
|---|---|---|---|
Sales VAT | Sales to private individuals when the annual sales exceed €10,000 | Seller | Varies per country (e.g., France 20%, Germany 19%) |
Import VAT | Goods imported from non EU countries | Seller or customer | Based on the destination country. |
Customs Obligations | Imports over €150 from different countries outside the EU. | Seller or customer | Varies by product type |
Income Tax | Profits from dropshipping | Company or sole trader | Varies by legal status |
How to manage and declare VAT on dropshipping?
Handling VAT might seem tricky at first, but with the right tools and best practices, you’ll avoid mistakes and optimize your taxes in no time!
Should we file dropshipping VAT?
The rule is simple: if you collect VAT, you must declare it. But then, it still depends on your business location and customers’ country.
You only sell in France:
Sole traders: no VAT returns if you are below the 91,900€ revenue threshold.
Companies: you must declare and remit collected VAT to the French tax authorities (see French VAT rate obligations here).
You sell in the EU member states:
Below 10 000€ of annual sales: your EU VAT liability applies.
Beyond 10,000€: You must charge the VAT rate of the customer's country and declare it through the One-Stop Shop (OSS).
You sell outside the EU:
VAT does not apply to your sales exports. However, you must pay VAT on any goods you import from abroad.
Even if you're VAT exempt, you might still need to file a tax return to confirm your status and avoid audits.
Why proper VAT treatment matters in Dropshipping?
Managing VAT correctly isn’t just about compliance—it’s also to prevent issues and optimize your e commerce business.
Avoid Tax Penalties: Incorrect VAT returns can lead to fines and financial audits.
Prevent Order Delays: Unpaid VAT or customs fees cause shipments delay and unhappy customers.
Maximize Profit Margins: By recovering dropshipping VAT on purchases when possible.
The OECD offers a detailed guide on VAT and consumption tax management for international businesses, explaining tax thresholds and reporting obligations in simple terms.
Types of Taxes in Dropshipping
VAT and Income Tax in Dropshipping
As a dropshipper, you should manage various taxes and customs duties. Unlike a regular shop with simpler taxes, dropshipping has specific tax obligations based on where you are registered and where your customers are.
Here are several factors to consider:
VAT (Value-Added Tax): Applied to dropshipping products in many countries, mostly in EU member states.
Income Tax or Corporate Tax: Depending on your legal status, you will be taxed on your business profits.
How VAT Works in Dropshipping?
Dropshipping VAT applies on products sales based on the final customer’s country. This means you must:
Charge local VAT if your EU sales exceed the €10,000 annual threshold.
Declare and pay VAT in each relevant country, unless you use the One Stop Shop (OSS) system that simplifies this process.
Comply with local VAT rates which vary from country to country:
France: 20%
Germany: 19%
Spain: 21%
For non EU countries, invoice rules differ. For instance, the United States does not have VAT but enforces sales tax on certain exceptions, which is applied at the state level.
How Income Tax Works in Dropshipping?
Income tax obligations depend on your legal status and country of residence.
For sole traders in France, dropshipping profits follow the micro-tax regime, with a flat 12.8% income tax plus 22% social charges.
If you run a limited company (e.g., SAS, SARL) you’ll pay a corporate tax, typically 15% for profits up to €42,500 and 25% above that. (Official source)
To optimize your taxes, it's vital to choose the right legal status and understand applicable tax rates.
Import VAT and Customs Duties
Managing dropshipping import tax is one of the toughest facets, mostly if you source products from non EU countries like China.
How Import VAT Works?
Since July 2021, all imports into EU countries are subject to VAT, no matter the value. This means that even a 10€ order on AliExpress can be taxed.
For goods under €150, VAT must be paid upfront or by the end customer upon delivery.
For goods over €150, customs duties may also apply.
The IOSS (Import One Stop Shop) system simplifies dropshipping VAT reporting for imported goods under €150.
Customs Duties in Dropshipping
Customs duties depend on the product's value and country of origin. Here are some general rules:
Products from China: Subject to customs duties starting at €150.
Products from an EU country: No customs duties, but dropshipping VAT applies.
Product Category: Some items, like electronic devices, may have additional dropshipping import tax.
To find out exactly how much you owe, you might want to try the official European customs simulator.
VAT Number for Dropshipping: Essential or Not?
A common question: Do I need a VAT number for dropshipping?
The answer depends on your sales volume (products sold) and business’s place.
When Is a VAT Number Required?
If you sell to European countries and exceed €10,000 annual turnover, you must be VAT registered to get a number.
If you store products in a warehouse in Europe (e.g., Amazon FBA in Germany), you must get a VAT number in this country.
If you sell to businesses in the EU, intra community shipment rules may apply.
How to Obtain a VAT Number ?
Well, the VAT registration varies across countries:
In France: you must apply through the business tax branch, also called Service des Impôts des Entreprises (SIE).
For dropshipping Germany tax: you register via the Federal Tax Office.
If you sell in multiple EU countries, you can use the One-Stop Shop (OSS) to file VAT returns in a single member state.
Key Takeaways: Managing VAT in Dropshipping
Type of Tax | When it applies ? | Who Pays? | Rate |
|---|---|---|---|
Sales VAT | Sales to private individuals when the annual sales exceed €10,000 | Seller | Varies per country (e.g., France 20%, Germany 19%) |
Import VAT | Goods imported from non EU countries | Seller or customer | Based on the destination country. |
Customs Obligations | Imports over €150 from different countries outside the EU. | Seller or customer | Varies by product type |
Income Tax | Profits from dropshipping | Company or sole trader | Varies by legal status |
How to manage and declare VAT on dropshipping?
Handling VAT might seem tricky at first, but with the right tools and best practices, you’ll avoid mistakes and optimize your taxes in no time!
Should we file dropshipping VAT?
The rule is simple: if you collect VAT, you must declare it. But then, it still depends on your business location and customers’ country.
You only sell in France:
Sole traders: no VAT returns if you are below the 91,900€ revenue threshold.
Companies: you must declare and remit collected VAT to the French tax authorities (see French VAT rate obligations here).
You sell in the EU member states:
Below 10 000€ of annual sales: your EU VAT liability applies.
Beyond 10,000€: You must charge the VAT rate of the customer's country and declare it through the One-Stop Shop (OSS).
You sell outside the EU:
VAT does not apply to your sales exports. However, you must pay VAT on any goods you import from abroad.
Even if you're VAT exempt, you might still need to file a tax return to confirm your status and avoid audits.
Why proper VAT treatment matters in Dropshipping?
Managing VAT correctly isn’t just about compliance—it’s also to prevent issues and optimize your e commerce business.
Avoid Tax Penalties: Incorrect VAT returns can lead to fines and financial audits.
Prevent Order Delays: Unpaid VAT or customs fees cause shipments delay and unhappy customers.
Maximize Profit Margins: By recovering dropshipping VAT on purchases when possible.
The OECD offers a detailed guide on VAT and consumption tax management for international businesses, explaining tax thresholds and reporting obligations in simple terms.
Types of Taxes in Dropshipping
VAT and Income Tax in Dropshipping
As a dropshipper, you should manage various taxes and customs duties. Unlike a regular shop with simpler taxes, dropshipping has specific tax obligations based on where you are registered and where your customers are.
Here are several factors to consider:
VAT (Value-Added Tax): Applied to dropshipping products in many countries, mostly in EU member states.
Income Tax or Corporate Tax: Depending on your legal status, you will be taxed on your business profits.
How VAT Works in Dropshipping?
Dropshipping VAT applies on products sales based on the final customer’s country. This means you must:
Charge local VAT if your EU sales exceed the €10,000 annual threshold.
Declare and pay VAT in each relevant country, unless you use the One Stop Shop (OSS) system that simplifies this process.
Comply with local VAT rates which vary from country to country:
France: 20%
Germany: 19%
Spain: 21%
For non EU countries, invoice rules differ. For instance, the United States does not have VAT but enforces sales tax on certain exceptions, which is applied at the state level.
How Income Tax Works in Dropshipping?
Income tax obligations depend on your legal status and country of residence.
For sole traders in France, dropshipping profits follow the micro-tax regime, with a flat 12.8% income tax plus 22% social charges.
If you run a limited company (e.g., SAS, SARL) you’ll pay a corporate tax, typically 15% for profits up to €42,500 and 25% above that. (Official source)
To optimize your taxes, it's vital to choose the right legal status and understand applicable tax rates.
Import VAT and Customs Duties
Managing dropshipping import tax is one of the toughest facets, mostly if you source products from non EU countries like China.
How Import VAT Works?
Since July 2021, all imports into EU countries are subject to VAT, no matter the value. This means that even a 10€ order on AliExpress can be taxed.
For goods under €150, VAT must be paid upfront or by the end customer upon delivery.
For goods over €150, customs duties may also apply.
The IOSS (Import One Stop Shop) system simplifies dropshipping VAT reporting for imported goods under €150.
Customs Duties in Dropshipping
Customs duties depend on the product's value and country of origin. Here are some general rules:
Products from China: Subject to customs duties starting at €150.
Products from an EU country: No customs duties, but dropshipping VAT applies.
Product Category: Some items, like electronic devices, may have additional dropshipping import tax.
To find out exactly how much you owe, you might want to try the official European customs simulator.
VAT Number for Dropshipping: Essential or Not?
A common question: Do I need a VAT number for dropshipping?
The answer depends on your sales volume (products sold) and business’s place.
When Is a VAT Number Required?
If you sell to European countries and exceed €10,000 annual turnover, you must be VAT registered to get a number.
If you store products in a warehouse in Europe (e.g., Amazon FBA in Germany), you must get a VAT number in this country.
If you sell to businesses in the EU, intra community shipment rules may apply.
How to Obtain a VAT Number ?
Well, the VAT registration varies across countries:
In France: you must apply through the business tax branch, also called Service des Impôts des Entreprises (SIE).
For dropshipping Germany tax: you register via the Federal Tax Office.
If you sell in multiple EU countries, you can use the One-Stop Shop (OSS) to file VAT returns in a single member state.
Key Takeaways: Managing VAT in Dropshipping
Type of Tax | When it applies ? | Who Pays? | Rate |
|---|---|---|---|
Sales VAT | Sales to private individuals when the annual sales exceed €10,000 | Seller | Varies per country (e.g., France 20%, Germany 19%) |
Import VAT | Goods imported from non EU countries | Seller or customer | Based on the destination country. |
Customs Obligations | Imports over €150 from different countries outside the EU. | Seller or customer | Varies by product type |
Income Tax | Profits from dropshipping | Company or sole trader | Varies by legal status |
How to manage and declare VAT on dropshipping?
Handling VAT might seem tricky at first, but with the right tools and best practices, you’ll avoid mistakes and optimize your taxes in no time!
Should we file dropshipping VAT?
The rule is simple: if you collect VAT, you must declare it. But then, it still depends on your business location and customers’ country.
You only sell in France:
Sole traders: no VAT returns if you are below the 91,900€ revenue threshold.
Companies: you must declare and remit collected VAT to the French tax authorities (see French VAT rate obligations here).
You sell in the EU member states:
Below 10 000€ of annual sales: your EU VAT liability applies.
Beyond 10,000€: You must charge the VAT rate of the customer's country and declare it through the One-Stop Shop (OSS).
You sell outside the EU:
VAT does not apply to your sales exports. However, you must pay VAT on any goods you import from abroad.
Even if you're VAT exempt, you might still need to file a tax return to confirm your status and avoid audits.
Why proper VAT treatment matters in Dropshipping?
Managing VAT correctly isn’t just about compliance—it’s also to prevent issues and optimize your e commerce business.
Avoid Tax Penalties: Incorrect VAT returns can lead to fines and financial audits.
Prevent Order Delays: Unpaid VAT or customs fees cause shipments delay and unhappy customers.
Maximize Profit Margins: By recovering dropshipping VAT on purchases when possible.
The OECD offers a detailed guide on VAT and consumption tax management for international businesses, explaining tax thresholds and reporting obligations in simple terms.
Types of Taxes in Dropshipping
VAT and Income Tax in Dropshipping
As a dropshipper, you should manage various taxes and customs duties. Unlike a regular shop with simpler taxes, dropshipping has specific tax obligations based on where you are registered and where your customers are.
Here are several factors to consider:
VAT (Value-Added Tax): Applied to dropshipping products in many countries, mostly in EU member states.
Income Tax or Corporate Tax: Depending on your legal status, you will be taxed on your business profits.
How VAT Works in Dropshipping?
Dropshipping VAT applies on products sales based on the final customer’s country. This means you must:
Charge local VAT if your EU sales exceed the €10,000 annual threshold.
Declare and pay VAT in each relevant country, unless you use the One Stop Shop (OSS) system that simplifies this process.
Comply with local VAT rates which vary from country to country:
France: 20%
Germany: 19%
Spain: 21%
For non EU countries, invoice rules differ. For instance, the United States does not have VAT but enforces sales tax on certain exceptions, which is applied at the state level.
How Income Tax Works in Dropshipping?
Income tax obligations depend on your legal status and country of residence.
For sole traders in France, dropshipping profits follow the micro-tax regime, with a flat 12.8% income tax plus 22% social charges.
If you run a limited company (e.g., SAS, SARL) you’ll pay a corporate tax, typically 15% for profits up to €42,500 and 25% above that. (Official source)
To optimize your taxes, it's vital to choose the right legal status and understand applicable tax rates.
Import VAT and Customs Duties
Managing dropshipping import tax is one of the toughest facets, mostly if you source products from non EU countries like China.
How Import VAT Works?
Since July 2021, all imports into EU countries are subject to VAT, no matter the value. This means that even a 10€ order on AliExpress can be taxed.
For goods under €150, VAT must be paid upfront or by the end customer upon delivery.
For goods over €150, customs duties may also apply.
The IOSS (Import One Stop Shop) system simplifies dropshipping VAT reporting for imported goods under €150.
Customs Duties in Dropshipping
Customs duties depend on the product's value and country of origin. Here are some general rules:
Products from China: Subject to customs duties starting at €150.
Products from an EU country: No customs duties, but dropshipping VAT applies.
Product Category: Some items, like electronic devices, may have additional dropshipping import tax.
To find out exactly how much you owe, you might want to try the official European customs simulator.
VAT Number for Dropshipping: Essential or Not?
A common question: Do I need a VAT number for dropshipping?
The answer depends on your sales volume (products sold) and business’s place.
When Is a VAT Number Required?
If you sell to European countries and exceed €10,000 annual turnover, you must be VAT registered to get a number.
If you store products in a warehouse in Europe (e.g., Amazon FBA in Germany), you must get a VAT number in this country.
If you sell to businesses in the EU, intra community shipment rules may apply.
How to Obtain a VAT Number ?
Well, the VAT registration varies across countries:
In France: you must apply through the business tax branch, also called Service des Impôts des Entreprises (SIE).
For dropshipping Germany tax: you register via the Federal Tax Office.
If you sell in multiple EU countries, you can use the One-Stop Shop (OSS) to file VAT returns in a single member state.
Key Takeaways: Managing VAT in Dropshipping
Type of Tax | When it applies ? | Who Pays? | Rate |
|---|---|---|---|
Sales VAT | Sales to private individuals when the annual sales exceed €10,000 | Seller | Varies per country (e.g., France 20%, Germany 19%) |
Import VAT | Goods imported from non EU countries | Seller or customer | Based on the destination country. |
Customs Obligations | Imports over €150 from different countries outside the EU. | Seller or customer | Varies by product type |
Income Tax | Profits from dropshipping | Company or sole trader | Varies by legal status |
How to manage and declare VAT on dropshipping?
Handling VAT might seem tricky at first, but with the right tools and best practices, you’ll avoid mistakes and optimize your taxes in no time!
Should we file dropshipping VAT?
The rule is simple: if you collect VAT, you must declare it. But then, it still depends on your business location and customers’ country.
You only sell in France:
Sole traders: no VAT returns if you are below the 91,900€ revenue threshold.
Companies: you must declare and remit collected VAT to the French tax authorities (see French VAT rate obligations here).
You sell in the EU member states:
Below 10 000€ of annual sales: your EU VAT liability applies.
Beyond 10,000€: You must charge the VAT rate of the customer's country and declare it through the One-Stop Shop (OSS).
You sell outside the EU:
VAT does not apply to your sales exports. However, you must pay VAT on any goods you import from abroad.
Even if you're VAT exempt, you might still need to file a tax return to confirm your status and avoid audits.
Why proper VAT treatment matters in Dropshipping?
Managing VAT correctly isn’t just about compliance—it’s also to prevent issues and optimize your e commerce business.
Avoid Tax Penalties: Incorrect VAT returns can lead to fines and financial audits.
Prevent Order Delays: Unpaid VAT or customs fees cause shipments delay and unhappy customers.
Maximize Profit Margins: By recovering dropshipping VAT on purchases when possible.
The OECD offers a detailed guide on VAT and consumption tax management for international businesses, explaining tax thresholds and reporting obligations in simple terms.
Types of Taxes in Dropshipping
VAT and Income Tax in Dropshipping
As a dropshipper, you should manage various taxes and customs duties. Unlike a regular shop with simpler taxes, dropshipping has specific tax obligations based on where you are registered and where your customers are.
Here are several factors to consider:
VAT (Value-Added Tax): Applied to dropshipping products in many countries, mostly in EU member states.
Income Tax or Corporate Tax: Depending on your legal status, you will be taxed on your business profits.
How VAT Works in Dropshipping?
Dropshipping VAT applies on products sales based on the final customer’s country. This means you must:
Charge local VAT if your EU sales exceed the €10,000 annual threshold.
Declare and pay VAT in each relevant country, unless you use the One Stop Shop (OSS) system that simplifies this process.
Comply with local VAT rates which vary from country to country:
France: 20%
Germany: 19%
Spain: 21%
For non EU countries, invoice rules differ. For instance, the United States does not have VAT but enforces sales tax on certain exceptions, which is applied at the state level.
How Income Tax Works in Dropshipping?
Income tax obligations depend on your legal status and country of residence.
For sole traders in France, dropshipping profits follow the micro-tax regime, with a flat 12.8% income tax plus 22% social charges.
If you run a limited company (e.g., SAS, SARL) you’ll pay a corporate tax, typically 15% for profits up to €42,500 and 25% above that. (Official source)
To optimize your taxes, it's vital to choose the right legal status and understand applicable tax rates.
Import VAT and Customs Duties
Managing dropshipping import tax is one of the toughest facets, mostly if you source products from non EU countries like China.
How Import VAT Works?
Since July 2021, all imports into EU countries are subject to VAT, no matter the value. This means that even a 10€ order on AliExpress can be taxed.
For goods under €150, VAT must be paid upfront or by the end customer upon delivery.
For goods over €150, customs duties may also apply.
The IOSS (Import One Stop Shop) system simplifies dropshipping VAT reporting for imported goods under €150.
Customs Duties in Dropshipping
Customs duties depend on the product's value and country of origin. Here are some general rules:
Products from China: Subject to customs duties starting at €150.
Products from an EU country: No customs duties, but dropshipping VAT applies.
Product Category: Some items, like electronic devices, may have additional dropshipping import tax.
To find out exactly how much you owe, you might want to try the official European customs simulator.
VAT Number for Dropshipping: Essential or Not?
A common question: Do I need a VAT number for dropshipping?
The answer depends on your sales volume (products sold) and business’s place.
When Is a VAT Number Required?
If you sell to European countries and exceed €10,000 annual turnover, you must be VAT registered to get a number.
If you store products in a warehouse in Europe (e.g., Amazon FBA in Germany), you must get a VAT number in this country.
If you sell to businesses in the EU, intra community shipment rules may apply.
How to Obtain a VAT Number ?
Well, the VAT registration varies across countries:
In France: you must apply through the business tax branch, also called Service des Impôts des Entreprises (SIE).
For dropshipping Germany tax: you register via the Federal Tax Office.
If you sell in multiple EU countries, you can use the One-Stop Shop (OSS) to file VAT returns in a single member state.
Key Takeaways: Managing VAT in Dropshipping
Type of Tax | When it applies ? | Who Pays? | Rate |
|---|---|---|---|
Sales VAT | Sales to private individuals when the annual sales exceed €10,000 | Seller | Varies per country (e.g., France 20%, Germany 19%) |
Import VAT | Goods imported from non EU countries | Seller or customer | Based on the destination country. |
Customs Obligations | Imports over €150 from different countries outside the EU. | Seller or customer | Varies by product type |
Income Tax | Profits from dropshipping | Company or sole trader | Varies by legal status |
How to manage and declare VAT on dropshipping?
Handling VAT might seem tricky at first, but with the right tools and best practices, you’ll avoid mistakes and optimize your taxes in no time!
Should we file dropshipping VAT?
The rule is simple: if you collect VAT, you must declare it. But then, it still depends on your business location and customers’ country.
You only sell in France:
Sole traders: no VAT returns if you are below the 91,900€ revenue threshold.
Companies: you must declare and remit collected VAT to the French tax authorities (see French VAT rate obligations here).
You sell in the EU member states:
Below 10 000€ of annual sales: your EU VAT liability applies.
Beyond 10,000€: You must charge the VAT rate of the customer's country and declare it through the One-Stop Shop (OSS).
You sell outside the EU:
VAT does not apply to your sales exports. However, you must pay VAT on any goods you import from abroad.
Even if you're VAT exempt, you might still need to file a tax return to confirm your status and avoid audits.
Why proper VAT treatment matters in Dropshipping?
Managing VAT correctly isn’t just about compliance—it’s also to prevent issues and optimize your e commerce business.
Avoid Tax Penalties: Incorrect VAT returns can lead to fines and financial audits.
Prevent Order Delays: Unpaid VAT or customs fees cause shipments delay and unhappy customers.
Maximize Profit Margins: By recovering dropshipping VAT on purchases when possible.
The OECD offers a detailed guide on VAT and consumption tax management for international businesses, explaining tax thresholds and reporting obligations in simple terms.
Types of Taxes in Dropshipping
VAT and Income Tax in Dropshipping
As a dropshipper, you should manage various taxes and customs duties. Unlike a regular shop with simpler taxes, dropshipping has specific tax obligations based on where you are registered and where your customers are.
Here are several factors to consider:
VAT (Value-Added Tax): Applied to dropshipping products in many countries, mostly in EU member states.
Income Tax or Corporate Tax: Depending on your legal status, you will be taxed on your business profits.
How VAT Works in Dropshipping?
Dropshipping VAT applies on products sales based on the final customer’s country. This means you must:
Charge local VAT if your EU sales exceed the €10,000 annual threshold.
Declare and pay VAT in each relevant country, unless you use the One Stop Shop (OSS) system that simplifies this process.
Comply with local VAT rates which vary from country to country:
France: 20%
Germany: 19%
Spain: 21%
For non EU countries, invoice rules differ. For instance, the United States does not have VAT but enforces sales tax on certain exceptions, which is applied at the state level.
How Income Tax Works in Dropshipping?
Income tax obligations depend on your legal status and country of residence.
For sole traders in France, dropshipping profits follow the micro-tax regime, with a flat 12.8% income tax plus 22% social charges.
If you run a limited company (e.g., SAS, SARL) you’ll pay a corporate tax, typically 15% for profits up to €42,500 and 25% above that. (Official source)
To optimize your taxes, it's vital to choose the right legal status and understand applicable tax rates.
Import VAT and Customs Duties
Managing dropshipping import tax is one of the toughest facets, mostly if you source products from non EU countries like China.
How Import VAT Works?
Since July 2021, all imports into EU countries are subject to VAT, no matter the value. This means that even a 10€ order on AliExpress can be taxed.
For goods under €150, VAT must be paid upfront or by the end customer upon delivery.
For goods over €150, customs duties may also apply.
The IOSS (Import One Stop Shop) system simplifies dropshipping VAT reporting for imported goods under €150.
Customs Duties in Dropshipping
Customs duties depend on the product's value and country of origin. Here are some general rules:
Products from China: Subject to customs duties starting at €150.
Products from an EU country: No customs duties, but dropshipping VAT applies.
Product Category: Some items, like electronic devices, may have additional dropshipping import tax.
To find out exactly how much you owe, you might want to try the official European customs simulator.
VAT Number for Dropshipping: Essential or Not?
A common question: Do I need a VAT number for dropshipping?
The answer depends on your sales volume (products sold) and business’s place.
When Is a VAT Number Required?
If you sell to European countries and exceed €10,000 annual turnover, you must be VAT registered to get a number.
If you store products in a warehouse in Europe (e.g., Amazon FBA in Germany), you must get a VAT number in this country.
If you sell to businesses in the EU, intra community shipment rules may apply.
How to Obtain a VAT Number ?
Well, the VAT registration varies across countries:
In France: you must apply through the business tax branch, also called Service des Impôts des Entreprises (SIE).
For dropshipping Germany tax: you register via the Federal Tax Office.
If you sell in multiple EU countries, you can use the One-Stop Shop (OSS) to file VAT returns in a single member state.
Key Takeaways: Managing VAT in Dropshipping
Type of Tax | When it applies ? | Who Pays? | Rate |
|---|---|---|---|
Sales VAT | Sales to private individuals when the annual sales exceed €10,000 | Seller | Varies per country (e.g., France 20%, Germany 19%) |
Import VAT | Goods imported from non EU countries | Seller or customer | Based on the destination country. |
Customs Obligations | Imports over €150 from different countries outside the EU. | Seller or customer | Varies by product type |
Income Tax | Profits from dropshipping | Company or sole trader | Varies by legal status |
How to manage and declare VAT on dropshipping?
Handling VAT might seem tricky at first, but with the right tools and best practices, you’ll avoid mistakes and optimize your taxes in no time!
Should we file dropshipping VAT?
The rule is simple: if you collect VAT, you must declare it. But then, it still depends on your business location and customers’ country.
You only sell in France:
Sole traders: no VAT returns if you are below the 91,900€ revenue threshold.
Companies: you must declare and remit collected VAT to the French tax authorities (see French VAT rate obligations here).
You sell in the EU member states:
Below 10 000€ of annual sales: your EU VAT liability applies.
Beyond 10,000€: You must charge the VAT rate of the customer's country and declare it through the One-Stop Shop (OSS).
You sell outside the EU:
VAT does not apply to your sales exports. However, you must pay VAT on any goods you import from abroad.
Even if you're VAT exempt, you might still need to file a tax return to confirm your status and avoid audits.
How to file dropshipping VAT Europe?
1. Using the One Stop Shop (OSS)
The OSS portal lets you report imports for all your European customers in one place, so you don’t need to separately register for VAT in each country.
How it works:
· Sign up on your country’s OSS registration portal.
· Report your revenue and VAT collected for each country.
· Pay once to your tax authority, and they’ll send the funds across the EU.
2. Declaring in Each Country
If you prefer skipping OSS, you’ll need to:
· Get a VAT number in each country where your sales go over 10,000€ (or the local limit).
· File VAT returns based on each country’s rules.
· Keep detailed bookkeeping in case tax officials request proof.
This takes time and effort, which clearly makes OSS the easier option.
How to pay the Collected VAT ?
After declaring your VAT, you'll need to pay it to the tax authority. Deadlines for dropshipping import tax vary per country, ranging from monthly to every 3 months:
In France: French VAT rate is typically paid either monthly or quarterly via your online tax account. (see here)
In different EU countries: If you use OSS, a single payment covers all European countries.
Outside the EU and in third countries: Invoice rules may differ; for example, the UK needs local VAT on certain imports. (Dropshipping VAT UK)
Penalties apply when you’re late. Pro Tip: It’s best to plan ahead and avoid extra charges and delays on your dropshipping business.
Tools and tips to manage VAT simply
VAT compliance is a tough nut to crack, but here are tools that do the hard work for you.
Use Automated Accounting Softwares:
Use platforms like QuickBooks, Sage, Xero, or Pennylane. They help you:
automatically gage VAT, for each item.
create ready-to-use returns,
and run payments without error.
2. Activate VAT Settings on Shopify and WooCommerce:
If you sell on Shopify, WooCommerce, or PrestaShop, you can turn on automatic VAT based on the buyer's country.
Just enable the setting, the right dropshipping VAT rate will apply automatically.
Outsource Tax Management:
If your cross border sales are growing fast, consider hiring an e-commerce accountant. They can help you:
Avoid errors,
Optimize your input taxes,
Ensure you comply with local laws.
Summary : How to handle VAT dropshipping?
Task | What to do ? | Recommended Tool |
|---|---|---|
Check if you need to charge VAT | Look at your products sold and where you're selling goods. | |
Collect and charge VAT | Use Shopify or WooCommerce for your dropshipping store. | Shopify/WooCommerce |
Report and remit VAT | Use the OSS scheme or report in each country | OSS One-Stop Shop |
Meet tax requirements | Use accounting software | QuickBooks, Xero, Sage |
Plan payments | Keep track of deadlines | Hire an accountant if needed |
Optimise VAT Dropshipping and avoid common mistakes
Handling dropshipping VAT is one thing; making sure to avoid overpaying or getting into trouble is another. Many dropshipping businesses lose money due to errors or poor optimization. Here's how to minimize your tax load while staying legal.
Common VAT dropshipping pitfalls and how to avoid them
Some errors can be costly, causing fines or blocking orders. Here’s what to watch out for and how to avoid them.
1. Not being VAT registered when it’s mandatory
Many dropshipping stores believe they don't need a VAT number if they're outside other EU countries or under the €10,000 limit. Wrong.
If your sales in national borders go over €10,000, you must file VAT in each country or use the OSS scheme.
Using Incorrect VAT Rates:
Charging the wrong VAT rate can lead to tax problems.
Check the current rates in each country where you’re selling goods. Set up your Shopify or WooCommerce store to apply the correct VAT automatically.
Tools like TaxJar or Avalara can easily help manage these rates.
3. Failing to Collect VAT for Intra community shipment:
Think customers pay VAT themselves? Not at all: it’s up to the seller to collect and pay it.
Once your national borders’ sales top 10,000€, charge and declare the local VAT.
4. Overlooking Import tax:
Don't forget dropshipping VAT and Customs Fees When Importing from Non EU Countries
Solution:
For products under €150, use the IOSS system to simplify VAT invoice process.
For products sold over €150, inform your customer of the fees due upon delivery to avoid returns or disputes.
5. Failing to Declare VAT Even If Exempt
Some think that if their e commerce business is VAT-exempt, they won’t declare anything. That’s a big mistake.
Even if you’re exempt, an annual return is often required to prove your status. Check with your tax office (e.g., in France).
Tips for maintaining VAT Compliance
There are lots of ways to optimize your VAT while staying 100% legal.
Start as a Micro-Entrepreneur :
If you're launching a dropshipping store, starting as a sole trader can be a smart move. You get a VAT exemption up to €91,900 in revenue, meaning you don't charge French VAT rate to your customers in France.
Once you exceed this amount, you must charge and file VAT.
2. Source from European Suppliers:
Buying your products directly in Europe cuts dropshipping import tax and avoids customs issues.
European Union suppliers = No import VAT.
Faster delivery and fewer hidden costs for your customers.
If you work with AliExpress or Alibaba, choose sellers with warehouses in Europe to enjoy all the perks.
3. Enable Automatic VAT dropshipping Settings:
Use the built-in VAT settings on your dropshipping store to apply correct rates based on the customer’s country. This avoids manual mistakes and makes tax filing easier.
4. Claim VAT on Business Expenses
If your business is VAT registered, you can claim VAT back on your professional purchases (e.g., Facebook Ads, SaaS subscriptions, computer equipment, etc.).
How To?
Keep all VAT invoices: make sure they show invoice rules.
Report these expenses: include them in your VAT return.
Optimise your cash flow: reduce the VAT liability.
How to file dropshipping VAT Europe?
1. Using the One Stop Shop (OSS)
The OSS portal lets you report imports for all your European customers in one place, so you don’t need to separately register for VAT in each country.
How it works:
· Sign up on your country’s OSS registration portal.
· Report your revenue and VAT collected for each country.
· Pay once to your tax authority, and they’ll send the funds across the EU.
2. Declaring in Each Country
If you prefer skipping OSS, you’ll need to:
· Get a VAT number in each country where your sales go over 10,000€ (or the local limit).
· File VAT returns based on each country’s rules.
· Keep detailed bookkeeping in case tax officials request proof.
This takes time and effort, which clearly makes OSS the easier option.
How to pay the Collected VAT ?
After declaring your VAT, you'll need to pay it to the tax authority. Deadlines for dropshipping import tax vary per country, ranging from monthly to every 3 months:
In France: French VAT rate is typically paid either monthly or quarterly via your online tax account. (see here)
In different EU countries: If you use OSS, a single payment covers all European countries.
Outside the EU and in third countries: Invoice rules may differ; for example, the UK needs local VAT on certain imports. (Dropshipping VAT UK)
Penalties apply when you’re late. Pro Tip: It’s best to plan ahead and avoid extra charges and delays on your dropshipping business.
Tools and tips to manage VAT simply
VAT compliance is a tough nut to crack, but here are tools that do the hard work for you.
Use Automated Accounting Softwares:
Use platforms like QuickBooks, Sage, Xero, or Pennylane. They help you:
automatically gage VAT, for each item.
create ready-to-use returns,
and run payments without error.
2. Activate VAT Settings on Shopify and WooCommerce:
If you sell on Shopify, WooCommerce, or PrestaShop, you can turn on automatic VAT based on the buyer's country.
Just enable the setting, the right dropshipping VAT rate will apply automatically.
Outsource Tax Management:
If your cross border sales are growing fast, consider hiring an e-commerce accountant. They can help you:
Avoid errors,
Optimize your input taxes,
Ensure you comply with local laws.
Summary : How to handle VAT dropshipping?
Task | What to do ? | Recommended Tool |
|---|---|---|
Check if you need to charge VAT | Look at your products sold and where you're selling goods. | |
Collect and charge VAT | Use Shopify or WooCommerce for your dropshipping store. | Shopify/WooCommerce |
Report and remit VAT | Use the OSS scheme or report in each country | OSS One-Stop Shop |
Meet tax requirements | Use accounting software | QuickBooks, Xero, Sage |
Plan payments | Keep track of deadlines | Hire an accountant if needed |
Optimise VAT Dropshipping and avoid common mistakes
Handling dropshipping VAT is one thing; making sure to avoid overpaying or getting into trouble is another. Many dropshipping businesses lose money due to errors or poor optimization. Here's how to minimize your tax load while staying legal.
Common VAT dropshipping pitfalls and how to avoid them
Some errors can be costly, causing fines or blocking orders. Here’s what to watch out for and how to avoid them.
1. Not being VAT registered when it’s mandatory
Many dropshipping stores believe they don't need a VAT number if they're outside other EU countries or under the €10,000 limit. Wrong.
If your sales in national borders go over €10,000, you must file VAT in each country or use the OSS scheme.
Using Incorrect VAT Rates:
Charging the wrong VAT rate can lead to tax problems.
Check the current rates in each country where you’re selling goods. Set up your Shopify or WooCommerce store to apply the correct VAT automatically.
Tools like TaxJar or Avalara can easily help manage these rates.
3. Failing to Collect VAT for Intra community shipment:
Think customers pay VAT themselves? Not at all: it’s up to the seller to collect and pay it.
Once your national borders’ sales top 10,000€, charge and declare the local VAT.
4. Overlooking Import tax:
Don't forget dropshipping VAT and Customs Fees When Importing from Non EU Countries
Solution:
For products under €150, use the IOSS system to simplify VAT invoice process.
For products sold over €150, inform your customer of the fees due upon delivery to avoid returns or disputes.
5. Failing to Declare VAT Even If Exempt
Some think that if their e commerce business is VAT-exempt, they won’t declare anything. That’s a big mistake.
Even if you’re exempt, an annual return is often required to prove your status. Check with your tax office (e.g., in France).
Tips for maintaining VAT Compliance
There are lots of ways to optimize your VAT while staying 100% legal.
Start as a Micro-Entrepreneur :
If you're launching a dropshipping store, starting as a sole trader can be a smart move. You get a VAT exemption up to €91,900 in revenue, meaning you don't charge French VAT rate to your customers in France.
Once you exceed this amount, you must charge and file VAT.
2. Source from European Suppliers:
Buying your products directly in Europe cuts dropshipping import tax and avoids customs issues.
European Union suppliers = No import VAT.
Faster delivery and fewer hidden costs for your customers.
If you work with AliExpress or Alibaba, choose sellers with warehouses in Europe to enjoy all the perks.
3. Enable Automatic VAT dropshipping Settings:
Use the built-in VAT settings on your dropshipping store to apply correct rates based on the customer’s country. This avoids manual mistakes and makes tax filing easier.
4. Claim VAT on Business Expenses
If your business is VAT registered, you can claim VAT back on your professional purchases (e.g., Facebook Ads, SaaS subscriptions, computer equipment, etc.).
How To?
Keep all VAT invoices: make sure they show invoice rules.
Report these expenses: include them in your VAT return.
Optimise your cash flow: reduce the VAT liability.
How to file dropshipping VAT Europe?
1. Using the One Stop Shop (OSS)
The OSS portal lets you report imports for all your European customers in one place, so you don’t need to separately register for VAT in each country.
How it works:
· Sign up on your country’s OSS registration portal.
· Report your revenue and VAT collected for each country.
· Pay once to your tax authority, and they’ll send the funds across the EU.
2. Declaring in Each Country
If you prefer skipping OSS, you’ll need to:
· Get a VAT number in each country where your sales go over 10,000€ (or the local limit).
· File VAT returns based on each country’s rules.
· Keep detailed bookkeeping in case tax officials request proof.
This takes time and effort, which clearly makes OSS the easier option.
How to pay the Collected VAT ?
After declaring your VAT, you'll need to pay it to the tax authority. Deadlines for dropshipping import tax vary per country, ranging from monthly to every 3 months:
In France: French VAT rate is typically paid either monthly or quarterly via your online tax account. (see here)
In different EU countries: If you use OSS, a single payment covers all European countries.
Outside the EU and in third countries: Invoice rules may differ; for example, the UK needs local VAT on certain imports. (Dropshipping VAT UK)
Penalties apply when you’re late. Pro Tip: It’s best to plan ahead and avoid extra charges and delays on your dropshipping business.
Tools and tips to manage VAT simply
VAT compliance is a tough nut to crack, but here are tools that do the hard work for you.
Use Automated Accounting Softwares:
Use platforms like QuickBooks, Sage, Xero, or Pennylane. They help you:
automatically gage VAT, for each item.
create ready-to-use returns,
and run payments without error.
2. Activate VAT Settings on Shopify and WooCommerce:
If you sell on Shopify, WooCommerce, or PrestaShop, you can turn on automatic VAT based on the buyer's country.
Just enable the setting, the right dropshipping VAT rate will apply automatically.
Outsource Tax Management:
If your cross border sales are growing fast, consider hiring an e-commerce accountant. They can help you:
Avoid errors,
Optimize your input taxes,
Ensure you comply with local laws.
Summary : How to handle VAT dropshipping?
Task | What to do ? | Recommended Tool |
|---|---|---|
Check if you need to charge VAT | Look at your products sold and where you're selling goods. | |
Collect and charge VAT | Use Shopify or WooCommerce for your dropshipping store. | Shopify/WooCommerce |
Report and remit VAT | Use the OSS scheme or report in each country | OSS One-Stop Shop |
Meet tax requirements | Use accounting software | QuickBooks, Xero, Sage |
Plan payments | Keep track of deadlines | Hire an accountant if needed |
Optimise VAT Dropshipping and avoid common mistakes
Handling dropshipping VAT is one thing; making sure to avoid overpaying or getting into trouble is another. Many dropshipping businesses lose money due to errors or poor optimization. Here's how to minimize your tax load while staying legal.
Common VAT dropshipping pitfalls and how to avoid them
Some errors can be costly, causing fines or blocking orders. Here’s what to watch out for and how to avoid them.
1. Not being VAT registered when it’s mandatory
Many dropshipping stores believe they don't need a VAT number if they're outside other EU countries or under the €10,000 limit. Wrong.
If your sales in national borders go over €10,000, you must file VAT in each country or use the OSS scheme.
Using Incorrect VAT Rates:
Charging the wrong VAT rate can lead to tax problems.
Check the current rates in each country where you’re selling goods. Set up your Shopify or WooCommerce store to apply the correct VAT automatically.
Tools like TaxJar or Avalara can easily help manage these rates.
3. Failing to Collect VAT for Intra community shipment:
Think customers pay VAT themselves? Not at all: it’s up to the seller to collect and pay it.
Once your national borders’ sales top 10,000€, charge and declare the local VAT.
4. Overlooking Import tax:
Don't forget dropshipping VAT and Customs Fees When Importing from Non EU Countries
Solution:
For products under €150, use the IOSS system to simplify VAT invoice process.
For products sold over €150, inform your customer of the fees due upon delivery to avoid returns or disputes.
5. Failing to Declare VAT Even If Exempt
Some think that if their e commerce business is VAT-exempt, they won’t declare anything. That’s a big mistake.
Even if you’re exempt, an annual return is often required to prove your status. Check with your tax office (e.g., in France).
Tips for maintaining VAT Compliance
There are lots of ways to optimize your VAT while staying 100% legal.
Start as a Micro-Entrepreneur :
If you're launching a dropshipping store, starting as a sole trader can be a smart move. You get a VAT exemption up to €91,900 in revenue, meaning you don't charge French VAT rate to your customers in France.
Once you exceed this amount, you must charge and file VAT.
2. Source from European Suppliers:
Buying your products directly in Europe cuts dropshipping import tax and avoids customs issues.
European Union suppliers = No import VAT.
Faster delivery and fewer hidden costs for your customers.
If you work with AliExpress or Alibaba, choose sellers with warehouses in Europe to enjoy all the perks.
3. Enable Automatic VAT dropshipping Settings:
Use the built-in VAT settings on your dropshipping store to apply correct rates based on the customer’s country. This avoids manual mistakes and makes tax filing easier.
4. Claim VAT on Business Expenses
If your business is VAT registered, you can claim VAT back on your professional purchases (e.g., Facebook Ads, SaaS subscriptions, computer equipment, etc.).
How To?
Keep all VAT invoices: make sure they show invoice rules.
Report these expenses: include them in your VAT return.
Optimise your cash flow: reduce the VAT liability.
How to file dropshipping VAT Europe?
1. Using the One Stop Shop (OSS)
The OSS portal lets you report imports for all your European customers in one place, so you don’t need to separately register for VAT in each country.
How it works:
· Sign up on your country’s OSS registration portal.
· Report your revenue and VAT collected for each country.
· Pay once to your tax authority, and they’ll send the funds across the EU.
2. Declaring in Each Country
If you prefer skipping OSS, you’ll need to:
· Get a VAT number in each country where your sales go over 10,000€ (or the local limit).
· File VAT returns based on each country’s rules.
· Keep detailed bookkeeping in case tax officials request proof.
This takes time and effort, which clearly makes OSS the easier option.
How to pay the Collected VAT ?
After declaring your VAT, you'll need to pay it to the tax authority. Deadlines for dropshipping import tax vary per country, ranging from monthly to every 3 months:
In France: French VAT rate is typically paid either monthly or quarterly via your online tax account. (see here)
In different EU countries: If you use OSS, a single payment covers all European countries.
Outside the EU and in third countries: Invoice rules may differ; for example, the UK needs local VAT on certain imports. (Dropshipping VAT UK)
Penalties apply when you’re late. Pro Tip: It’s best to plan ahead and avoid extra charges and delays on your dropshipping business.
Tools and tips to manage VAT simply
VAT compliance is a tough nut to crack, but here are tools that do the hard work for you.
Use Automated Accounting Softwares:
Use platforms like QuickBooks, Sage, Xero, or Pennylane. They help you:
automatically gage VAT, for each item.
create ready-to-use returns,
and run payments without error.
2. Activate VAT Settings on Shopify and WooCommerce:
If you sell on Shopify, WooCommerce, or PrestaShop, you can turn on automatic VAT based on the buyer's country.
Just enable the setting, the right dropshipping VAT rate will apply automatically.
Outsource Tax Management:
If your cross border sales are growing fast, consider hiring an e-commerce accountant. They can help you:
Avoid errors,
Optimize your input taxes,
Ensure you comply with local laws.
Summary : How to handle VAT dropshipping?
Task | What to do ? | Recommended Tool |
|---|---|---|
Check if you need to charge VAT | Look at your products sold and where you're selling goods. | |
Collect and charge VAT | Use Shopify or WooCommerce for your dropshipping store. | Shopify/WooCommerce |
Report and remit VAT | Use the OSS scheme or report in each country | OSS One-Stop Shop |
Meet tax requirements | Use accounting software | QuickBooks, Xero, Sage |
Plan payments | Keep track of deadlines | Hire an accountant if needed |
Optimise VAT Dropshipping and avoid common mistakes
Handling dropshipping VAT is one thing; making sure to avoid overpaying or getting into trouble is another. Many dropshipping businesses lose money due to errors or poor optimization. Here's how to minimize your tax load while staying legal.
Common VAT dropshipping pitfalls and how to avoid them
Some errors can be costly, causing fines or blocking orders. Here’s what to watch out for and how to avoid them.
1. Not being VAT registered when it’s mandatory
Many dropshipping stores believe they don't need a VAT number if they're outside other EU countries or under the €10,000 limit. Wrong.
If your sales in national borders go over €10,000, you must file VAT in each country or use the OSS scheme.
Using Incorrect VAT Rates:
Charging the wrong VAT rate can lead to tax problems.
Check the current rates in each country where you’re selling goods. Set up your Shopify or WooCommerce store to apply the correct VAT automatically.
Tools like TaxJar or Avalara can easily help manage these rates.
3. Failing to Collect VAT for Intra community shipment:
Think customers pay VAT themselves? Not at all: it’s up to the seller to collect and pay it.
Once your national borders’ sales top 10,000€, charge and declare the local VAT.
4. Overlooking Import tax:
Don't forget dropshipping VAT and Customs Fees When Importing from Non EU Countries
Solution:
For products under €150, use the IOSS system to simplify VAT invoice process.
For products sold over €150, inform your customer of the fees due upon delivery to avoid returns or disputes.
5. Failing to Declare VAT Even If Exempt
Some think that if their e commerce business is VAT-exempt, they won’t declare anything. That’s a big mistake.
Even if you’re exempt, an annual return is often required to prove your status. Check with your tax office (e.g., in France).
Tips for maintaining VAT Compliance
There are lots of ways to optimize your VAT while staying 100% legal.
Start as a Micro-Entrepreneur :
If you're launching a dropshipping store, starting as a sole trader can be a smart move. You get a VAT exemption up to €91,900 in revenue, meaning you don't charge French VAT rate to your customers in France.
Once you exceed this amount, you must charge and file VAT.
2. Source from European Suppliers:
Buying your products directly in Europe cuts dropshipping import tax and avoids customs issues.
European Union suppliers = No import VAT.
Faster delivery and fewer hidden costs for your customers.
If you work with AliExpress or Alibaba, choose sellers with warehouses in Europe to enjoy all the perks.
3. Enable Automatic VAT dropshipping Settings:
Use the built-in VAT settings on your dropshipping store to apply correct rates based on the customer’s country. This avoids manual mistakes and makes tax filing easier.
4. Claim VAT on Business Expenses
If your business is VAT registered, you can claim VAT back on your professional purchases (e.g., Facebook Ads, SaaS subscriptions, computer equipment, etc.).
How To?
Keep all VAT invoices: make sure they show invoice rules.
Report these expenses: include them in your VAT return.
Optimise your cash flow: reduce the VAT liability.
How to file dropshipping VAT Europe?
1. Using the One Stop Shop (OSS)
The OSS portal lets you report imports for all your European customers in one place, so you don’t need to separately register for VAT in each country.
How it works:
· Sign up on your country’s OSS registration portal.
· Report your revenue and VAT collected for each country.
· Pay once to your tax authority, and they’ll send the funds across the EU.
2. Declaring in Each Country
If you prefer skipping OSS, you’ll need to:
· Get a VAT number in each country where your sales go over 10,000€ (or the local limit).
· File VAT returns based on each country’s rules.
· Keep detailed bookkeeping in case tax officials request proof.
This takes time and effort, which clearly makes OSS the easier option.
How to pay the Collected VAT ?
After declaring your VAT, you'll need to pay it to the tax authority. Deadlines for dropshipping import tax vary per country, ranging from monthly to every 3 months:
In France: French VAT rate is typically paid either monthly or quarterly via your online tax account. (see here)
In different EU countries: If you use OSS, a single payment covers all European countries.
Outside the EU and in third countries: Invoice rules may differ; for example, the UK needs local VAT on certain imports. (Dropshipping VAT UK)
Penalties apply when you’re late. Pro Tip: It’s best to plan ahead and avoid extra charges and delays on your dropshipping business.
Tools and tips to manage VAT simply
VAT compliance is a tough nut to crack, but here are tools that do the hard work for you.
Use Automated Accounting Softwares:
Use platforms like QuickBooks, Sage, Xero, or Pennylane. They help you:
automatically gage VAT, for each item.
create ready-to-use returns,
and run payments without error.
2. Activate VAT Settings on Shopify and WooCommerce:
If you sell on Shopify, WooCommerce, or PrestaShop, you can turn on automatic VAT based on the buyer's country.
Just enable the setting, the right dropshipping VAT rate will apply automatically.
Outsource Tax Management:
If your cross border sales are growing fast, consider hiring an e-commerce accountant. They can help you:
Avoid errors,
Optimize your input taxes,
Ensure you comply with local laws.
Summary : How to handle VAT dropshipping?
Task | What to do ? | Recommended Tool |
|---|---|---|
Check if you need to charge VAT | Look at your products sold and where you're selling goods. | |
Collect and charge VAT | Use Shopify or WooCommerce for your dropshipping store. | Shopify/WooCommerce |
Report and remit VAT | Use the OSS scheme or report in each country | OSS One-Stop Shop |
Meet tax requirements | Use accounting software | QuickBooks, Xero, Sage |
Plan payments | Keep track of deadlines | Hire an accountant if needed |
Optimise VAT Dropshipping and avoid common mistakes
Handling dropshipping VAT is one thing; making sure to avoid overpaying or getting into trouble is another. Many dropshipping businesses lose money due to errors or poor optimization. Here's how to minimize your tax load while staying legal.
Common VAT dropshipping pitfalls and how to avoid them
Some errors can be costly, causing fines or blocking orders. Here’s what to watch out for and how to avoid them.
1. Not being VAT registered when it’s mandatory
Many dropshipping stores believe they don't need a VAT number if they're outside other EU countries or under the €10,000 limit. Wrong.
If your sales in national borders go over €10,000, you must file VAT in each country or use the OSS scheme.
Using Incorrect VAT Rates:
Charging the wrong VAT rate can lead to tax problems.
Check the current rates in each country where you’re selling goods. Set up your Shopify or WooCommerce store to apply the correct VAT automatically.
Tools like TaxJar or Avalara can easily help manage these rates.
3. Failing to Collect VAT for Intra community shipment:
Think customers pay VAT themselves? Not at all: it’s up to the seller to collect and pay it.
Once your national borders’ sales top 10,000€, charge and declare the local VAT.
4. Overlooking Import tax:
Don't forget dropshipping VAT and Customs Fees When Importing from Non EU Countries
Solution:
For products under €150, use the IOSS system to simplify VAT invoice process.
For products sold over €150, inform your customer of the fees due upon delivery to avoid returns or disputes.
5. Failing to Declare VAT Even If Exempt
Some think that if their e commerce business is VAT-exempt, they won’t declare anything. That’s a big mistake.
Even if you’re exempt, an annual return is often required to prove your status. Check with your tax office (e.g., in France).
Tips for maintaining VAT Compliance
There are lots of ways to optimize your VAT while staying 100% legal.
Start as a Micro-Entrepreneur :
If you're launching a dropshipping store, starting as a sole trader can be a smart move. You get a VAT exemption up to €91,900 in revenue, meaning you don't charge French VAT rate to your customers in France.
Once you exceed this amount, you must charge and file VAT.
2. Source from European Suppliers:
Buying your products directly in Europe cuts dropshipping import tax and avoids customs issues.
European Union suppliers = No import VAT.
Faster delivery and fewer hidden costs for your customers.
If you work with AliExpress or Alibaba, choose sellers with warehouses in Europe to enjoy all the perks.
3. Enable Automatic VAT dropshipping Settings:
Use the built-in VAT settings on your dropshipping store to apply correct rates based on the customer’s country. This avoids manual mistakes and makes tax filing easier.
4. Claim VAT on Business Expenses
If your business is VAT registered, you can claim VAT back on your professional purchases (e.g., Facebook Ads, SaaS subscriptions, computer equipment, etc.).
How To?
Keep all VAT invoices: make sure they show invoice rules.
Report these expenses: include them in your VAT return.
Optimise your cash flow: reduce the VAT liability.
How to file dropshipping VAT Europe?
1. Using the One Stop Shop (OSS)
The OSS portal lets you report imports for all your European customers in one place, so you don’t need to separately register for VAT in each country.
How it works:
· Sign up on your country’s OSS registration portal.
· Report your revenue and VAT collected for each country.
· Pay once to your tax authority, and they’ll send the funds across the EU.
2. Declaring in Each Country
If you prefer skipping OSS, you’ll need to:
· Get a VAT number in each country where your sales go over 10,000€ (or the local limit).
· File VAT returns based on each country’s rules.
· Keep detailed bookkeeping in case tax officials request proof.
This takes time and effort, which clearly makes OSS the easier option.
How to pay the Collected VAT ?
After declaring your VAT, you'll need to pay it to the tax authority. Deadlines for dropshipping import tax vary per country, ranging from monthly to every 3 months:
In France: French VAT rate is typically paid either monthly or quarterly via your online tax account. (see here)
In different EU countries: If you use OSS, a single payment covers all European countries.
Outside the EU and in third countries: Invoice rules may differ; for example, the UK needs local VAT on certain imports. (Dropshipping VAT UK)
Penalties apply when you’re late. Pro Tip: It’s best to plan ahead and avoid extra charges and delays on your dropshipping business.
Tools and tips to manage VAT simply
VAT compliance is a tough nut to crack, but here are tools that do the hard work for you.
Use Automated Accounting Softwares:
Use platforms like QuickBooks, Sage, Xero, or Pennylane. They help you:
automatically gage VAT, for each item.
create ready-to-use returns,
and run payments without error.
2. Activate VAT Settings on Shopify and WooCommerce:
If you sell on Shopify, WooCommerce, or PrestaShop, you can turn on automatic VAT based on the buyer's country.
Just enable the setting, the right dropshipping VAT rate will apply automatically.
Outsource Tax Management:
If your cross border sales are growing fast, consider hiring an e-commerce accountant. They can help you:
Avoid errors,
Optimize your input taxes,
Ensure you comply with local laws.
Summary : How to handle VAT dropshipping?
Task | What to do ? | Recommended Tool |
|---|---|---|
Check if you need to charge VAT | Look at your products sold and where you're selling goods. | |
Collect and charge VAT | Use Shopify or WooCommerce for your dropshipping store. | Shopify/WooCommerce |
Report and remit VAT | Use the OSS scheme or report in each country | OSS One-Stop Shop |
Meet tax requirements | Use accounting software | QuickBooks, Xero, Sage |
Plan payments | Keep track of deadlines | Hire an accountant if needed |
Optimise VAT Dropshipping and avoid common mistakes
Handling dropshipping VAT is one thing; making sure to avoid overpaying or getting into trouble is another. Many dropshipping businesses lose money due to errors or poor optimization. Here's how to minimize your tax load while staying legal.
Common VAT dropshipping pitfalls and how to avoid them
Some errors can be costly, causing fines or blocking orders. Here’s what to watch out for and how to avoid them.
1. Not being VAT registered when it’s mandatory
Many dropshipping stores believe they don't need a VAT number if they're outside other EU countries or under the €10,000 limit. Wrong.
If your sales in national borders go over €10,000, you must file VAT in each country or use the OSS scheme.
Using Incorrect VAT Rates:
Charging the wrong VAT rate can lead to tax problems.
Check the current rates in each country where you’re selling goods. Set up your Shopify or WooCommerce store to apply the correct VAT automatically.
Tools like TaxJar or Avalara can easily help manage these rates.
3. Failing to Collect VAT for Intra community shipment:
Think customers pay VAT themselves? Not at all: it’s up to the seller to collect and pay it.
Once your national borders’ sales top 10,000€, charge and declare the local VAT.
4. Overlooking Import tax:
Don't forget dropshipping VAT and Customs Fees When Importing from Non EU Countries
Solution:
For products under €150, use the IOSS system to simplify VAT invoice process.
For products sold over €150, inform your customer of the fees due upon delivery to avoid returns or disputes.
5. Failing to Declare VAT Even If Exempt
Some think that if their e commerce business is VAT-exempt, they won’t declare anything. That’s a big mistake.
Even if you’re exempt, an annual return is often required to prove your status. Check with your tax office (e.g., in France).
Tips for maintaining VAT Compliance
There are lots of ways to optimize your VAT while staying 100% legal.
Start as a Micro-Entrepreneur :
If you're launching a dropshipping store, starting as a sole trader can be a smart move. You get a VAT exemption up to €91,900 in revenue, meaning you don't charge French VAT rate to your customers in France.
Once you exceed this amount, you must charge and file VAT.
2. Source from European Suppliers:
Buying your products directly in Europe cuts dropshipping import tax and avoids customs issues.
European Union suppliers = No import VAT.
Faster delivery and fewer hidden costs for your customers.
If you work with AliExpress or Alibaba, choose sellers with warehouses in Europe to enjoy all the perks.
3. Enable Automatic VAT dropshipping Settings:
Use the built-in VAT settings on your dropshipping store to apply correct rates based on the customer’s country. This avoids manual mistakes and makes tax filing easier.
4. Claim VAT on Business Expenses
If your business is VAT registered, you can claim VAT back on your professional purchases (e.g., Facebook Ads, SaaS subscriptions, computer equipment, etc.).
How To?
Keep all VAT invoices: make sure they show invoice rules.
Report these expenses: include them in your VAT return.
Optimise your cash flow: reduce the VAT liability.
Conclusion
Dropshipping VAT may seem like a hassle, but with good organization and the right tools, it’s just a formality.
Key Takeaways:
If your sales exceed €10,000 in EU countries, you must charge and file local EU VAT.
Use the OSS scheme to easily manage dropshipping import tax.
Dodge common mistakes like forgetting import VAT or using wrong rates.
Claim VAT on business purchases to optimize your taxes.
Automate VAT compliance with tools like TaxJar, Quaderno, or Shopify Tax.
By following these best practices, you’ll secure your business, boost your margins, and stay on the right side of tax laws.
FAQ
Do I need a VAT number for dropshipping?
Yes, if you sell in Europe and make over €10,000 a year, you need an intra community VAT number and must charge VAT based on the customer's country. In France, you can apply for this through the Service des Impôts des Entreprises (SIE).
How do I know when to charge VAT?
In France only: Charge VAT dropshipping unless under the micro-entrepreneur scheme (VAT exemption).
In the EU: Apply local VAT if sales exceed €10,000 a year for intra-EU sales.
Outside the EU and in third countries: Sales are usually VAT-exempt, but customers might pay import taxes.
What is the OSS portal and how to use it?
The One Stop Shop (OSS) system makes it easier to handle VAT in the European Union. E-commerce businesses can file and pay collected VAT in one place, instead of registering in every country they sell in. You can sign up on your country's tax portal.
How can I reclaim VAT on my expenses?
After your VAT registration, you can reclaim VAT on your business expenses, including Facebook ads, SaaS subscriptions, and some costs from European suppliers.
Here's how:
Keep VAT invoices: Ensure your invoices mention VAT.
Report expenses: Include these expenses in your dropshipping VAT return.
Ask your accountant: Optimize these tax deductions with professional advice.
Do I need to pay VAT on imported goods?
Yes, since July 2021, all products imported into EU member states are subject to VAT.
Orders under €150: Use the IOSS system to pre-pay VAT and prevent your customer from paying it on delivery.
Orders over €150: Your customer will need to remit VAT and any customs fees when the parcel arrives.
How can I avoid overpaying VAT?
Buy from European suppliers: Avoid import VAT.
Deduct VAT on business expenses: This includes ads, software, and services.
Use tools like TaxJar or Quaderno: Automate your dropshipping VAT treatment.
Check applied VAT rates regularly: Prevent billing errors.
Conclusion
Dropshipping VAT may seem like a hassle, but with good organization and the right tools, it’s just a formality.
Key Takeaways:
If your sales exceed €10,000 in EU countries, you must charge and file local EU VAT.
Use the OSS scheme to easily manage dropshipping import tax.
Dodge common mistakes like forgetting import VAT or using wrong rates.
Claim VAT on business purchases to optimize your taxes.
Automate VAT compliance with tools like TaxJar, Quaderno, or Shopify Tax.
By following these best practices, you’ll secure your business, boost your margins, and stay on the right side of tax laws.
FAQ
Do I need a VAT number for dropshipping?
Yes, if you sell in Europe and make over €10,000 a year, you need an intra community VAT number and must charge VAT based on the customer's country. In France, you can apply for this through the Service des Impôts des Entreprises (SIE).
How do I know when to charge VAT?
In France only: Charge VAT dropshipping unless under the micro-entrepreneur scheme (VAT exemption).
In the EU: Apply local VAT if sales exceed €10,000 a year for intra-EU sales.
Outside the EU and in third countries: Sales are usually VAT-exempt, but customers might pay import taxes.
What is the OSS portal and how to use it?
The One Stop Shop (OSS) system makes it easier to handle VAT in the European Union. E-commerce businesses can file and pay collected VAT in one place, instead of registering in every country they sell in. You can sign up on your country's tax portal.
How can I reclaim VAT on my expenses?
After your VAT registration, you can reclaim VAT on your business expenses, including Facebook ads, SaaS subscriptions, and some costs from European suppliers.
Here's how:
Keep VAT invoices: Ensure your invoices mention VAT.
Report expenses: Include these expenses in your dropshipping VAT return.
Ask your accountant: Optimize these tax deductions with professional advice.
Do I need to pay VAT on imported goods?
Yes, since July 2021, all products imported into EU member states are subject to VAT.
Orders under €150: Use the IOSS system to pre-pay VAT and prevent your customer from paying it on delivery.
Orders over €150: Your customer will need to remit VAT and any customs fees when the parcel arrives.
How can I avoid overpaying VAT?
Buy from European suppliers: Avoid import VAT.
Deduct VAT on business expenses: This includes ads, software, and services.
Use tools like TaxJar or Quaderno: Automate your dropshipping VAT treatment.
Check applied VAT rates regularly: Prevent billing errors.
Conclusion
Dropshipping VAT may seem like a hassle, but with good organization and the right tools, it’s just a formality.
Key Takeaways:
If your sales exceed €10,000 in EU countries, you must charge and file local EU VAT.
Use the OSS scheme to easily manage dropshipping import tax.
Dodge common mistakes like forgetting import VAT or using wrong rates.
Claim VAT on business purchases to optimize your taxes.
Automate VAT compliance with tools like TaxJar, Quaderno, or Shopify Tax.
By following these best practices, you’ll secure your business, boost your margins, and stay on the right side of tax laws.
FAQ
Do I need a VAT number for dropshipping?
Yes, if you sell in Europe and make over €10,000 a year, you need an intra community VAT number and must charge VAT based on the customer's country. In France, you can apply for this through the Service des Impôts des Entreprises (SIE).
How do I know when to charge VAT?
In France only: Charge VAT dropshipping unless under the micro-entrepreneur scheme (VAT exemption).
In the EU: Apply local VAT if sales exceed €10,000 a year for intra-EU sales.
Outside the EU and in third countries: Sales are usually VAT-exempt, but customers might pay import taxes.
What is the OSS portal and how to use it?
The One Stop Shop (OSS) system makes it easier to handle VAT in the European Union. E-commerce businesses can file and pay collected VAT in one place, instead of registering in every country they sell in. You can sign up on your country's tax portal.
How can I reclaim VAT on my expenses?
After your VAT registration, you can reclaim VAT on your business expenses, including Facebook ads, SaaS subscriptions, and some costs from European suppliers.
Here's how:
Keep VAT invoices: Ensure your invoices mention VAT.
Report expenses: Include these expenses in your dropshipping VAT return.
Ask your accountant: Optimize these tax deductions with professional advice.
Do I need to pay VAT on imported goods?
Yes, since July 2021, all products imported into EU member states are subject to VAT.
Orders under €150: Use the IOSS system to pre-pay VAT and prevent your customer from paying it on delivery.
Orders over €150: Your customer will need to remit VAT and any customs fees when the parcel arrives.
How can I avoid overpaying VAT?
Buy from European suppliers: Avoid import VAT.
Deduct VAT on business expenses: This includes ads, software, and services.
Use tools like TaxJar or Quaderno: Automate your dropshipping VAT treatment.
Check applied VAT rates regularly: Prevent billing errors.
Conclusion
Dropshipping VAT may seem like a hassle, but with good organization and the right tools, it’s just a formality.
Key Takeaways:
If your sales exceed €10,000 in EU countries, you must charge and file local EU VAT.
Use the OSS scheme to easily manage dropshipping import tax.
Dodge common mistakes like forgetting import VAT or using wrong rates.
Claim VAT on business purchases to optimize your taxes.
Automate VAT compliance with tools like TaxJar, Quaderno, or Shopify Tax.
By following these best practices, you’ll secure your business, boost your margins, and stay on the right side of tax laws.
FAQ
Do I need a VAT number for dropshipping?
Yes, if you sell in Europe and make over €10,000 a year, you need an intra community VAT number and must charge VAT based on the customer's country. In France, you can apply for this through the Service des Impôts des Entreprises (SIE).
How do I know when to charge VAT?
In France only: Charge VAT dropshipping unless under the micro-entrepreneur scheme (VAT exemption).
In the EU: Apply local VAT if sales exceed €10,000 a year for intra-EU sales.
Outside the EU and in third countries: Sales are usually VAT-exempt, but customers might pay import taxes.
What is the OSS portal and how to use it?
The One Stop Shop (OSS) system makes it easier to handle VAT in the European Union. E-commerce businesses can file and pay collected VAT in one place, instead of registering in every country they sell in. You can sign up on your country's tax portal.
How can I reclaim VAT on my expenses?
After your VAT registration, you can reclaim VAT on your business expenses, including Facebook ads, SaaS subscriptions, and some costs from European suppliers.
Here's how:
Keep VAT invoices: Ensure your invoices mention VAT.
Report expenses: Include these expenses in your dropshipping VAT return.
Ask your accountant: Optimize these tax deductions with professional advice.
Do I need to pay VAT on imported goods?
Yes, since July 2021, all products imported into EU member states are subject to VAT.
Orders under €150: Use the IOSS system to pre-pay VAT and prevent your customer from paying it on delivery.
Orders over €150: Your customer will need to remit VAT and any customs fees when the parcel arrives.
How can I avoid overpaying VAT?
Buy from European suppliers: Avoid import VAT.
Deduct VAT on business expenses: This includes ads, software, and services.
Use tools like TaxJar or Quaderno: Automate your dropshipping VAT treatment.
Check applied VAT rates regularly: Prevent billing errors.
Conclusion
Dropshipping VAT may seem like a hassle, but with good organization and the right tools, it’s just a formality.
Key Takeaways:
If your sales exceed €10,000 in EU countries, you must charge and file local EU VAT.
Use the OSS scheme to easily manage dropshipping import tax.
Dodge common mistakes like forgetting import VAT or using wrong rates.
Claim VAT on business purchases to optimize your taxes.
Automate VAT compliance with tools like TaxJar, Quaderno, or Shopify Tax.
By following these best practices, you’ll secure your business, boost your margins, and stay on the right side of tax laws.
FAQ
Do I need a VAT number for dropshipping?
Yes, if you sell in Europe and make over €10,000 a year, you need an intra community VAT number and must charge VAT based on the customer's country. In France, you can apply for this through the Service des Impôts des Entreprises (SIE).
How do I know when to charge VAT?
In France only: Charge VAT dropshipping unless under the micro-entrepreneur scheme (VAT exemption).
In the EU: Apply local VAT if sales exceed €10,000 a year for intra-EU sales.
Outside the EU and in third countries: Sales are usually VAT-exempt, but customers might pay import taxes.
What is the OSS portal and how to use it?
The One Stop Shop (OSS) system makes it easier to handle VAT in the European Union. E-commerce businesses can file and pay collected VAT in one place, instead of registering in every country they sell in. You can sign up on your country's tax portal.
How can I reclaim VAT on my expenses?
After your VAT registration, you can reclaim VAT on your business expenses, including Facebook ads, SaaS subscriptions, and some costs from European suppliers.
Here's how:
Keep VAT invoices: Ensure your invoices mention VAT.
Report expenses: Include these expenses in your dropshipping VAT return.
Ask your accountant: Optimize these tax deductions with professional advice.
Do I need to pay VAT on imported goods?
Yes, since July 2021, all products imported into EU member states are subject to VAT.
Orders under €150: Use the IOSS system to pre-pay VAT and prevent your customer from paying it on delivery.
Orders over €150: Your customer will need to remit VAT and any customs fees when the parcel arrives.
How can I avoid overpaying VAT?
Buy from European suppliers: Avoid import VAT.
Deduct VAT on business expenses: This includes ads, software, and services.
Use tools like TaxJar or Quaderno: Automate your dropshipping VAT treatment.
Check applied VAT rates regularly: Prevent billing errors.
Conclusion
Dropshipping VAT may seem like a hassle, but with good organization and the right tools, it’s just a formality.
Key Takeaways:
If your sales exceed €10,000 in EU countries, you must charge and file local EU VAT.
Use the OSS scheme to easily manage dropshipping import tax.
Dodge common mistakes like forgetting import VAT or using wrong rates.
Claim VAT on business purchases to optimize your taxes.
Automate VAT compliance with tools like TaxJar, Quaderno, or Shopify Tax.
By following these best practices, you’ll secure your business, boost your margins, and stay on the right side of tax laws.
FAQ
Do I need a VAT number for dropshipping?
Yes, if you sell in Europe and make over €10,000 a year, you need an intra community VAT number and must charge VAT based on the customer's country. In France, you can apply for this through the Service des Impôts des Entreprises (SIE).
How do I know when to charge VAT?
In France only: Charge VAT dropshipping unless under the micro-entrepreneur scheme (VAT exemption).
In the EU: Apply local VAT if sales exceed €10,000 a year for intra-EU sales.
Outside the EU and in third countries: Sales are usually VAT-exempt, but customers might pay import taxes.
What is the OSS portal and how to use it?
The One Stop Shop (OSS) system makes it easier to handle VAT in the European Union. E-commerce businesses can file and pay collected VAT in one place, instead of registering in every country they sell in. You can sign up on your country's tax portal.
How can I reclaim VAT on my expenses?
After your VAT registration, you can reclaim VAT on your business expenses, including Facebook ads, SaaS subscriptions, and some costs from European suppliers.
Here's how:
Keep VAT invoices: Ensure your invoices mention VAT.
Report expenses: Include these expenses in your dropshipping VAT return.
Ask your accountant: Optimize these tax deductions with professional advice.
Do I need to pay VAT on imported goods?
Yes, since July 2021, all products imported into EU member states are subject to VAT.
Orders under €150: Use the IOSS system to pre-pay VAT and prevent your customer from paying it on delivery.
Orders over €150: Your customer will need to remit VAT and any customs fees when the parcel arrives.
How can I avoid overpaying VAT?
Buy from European suppliers: Avoid import VAT.
Deduct VAT on business expenses: This includes ads, software, and services.
Use tools like TaxJar or Quaderno: Automate your dropshipping VAT treatment.
Check applied VAT rates regularly: Prevent billing errors.
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Find winning products on our Tiktok adspy today!
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Find winning products on our Facebook adspy today!
Find winning products on our Tiktok adspy today!
Find winning products on our Pinterest adspy today!
Find winning products on our Facebook adspy today!
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Find winning products on our Tiktok adspy today!
Find winning products on our Pinterest adspy today!
Find winning products on our Facebook adspy today!
Find winning products on our Tiktok adspy today!
Find winning products on our Pinterest adspy today!
Find winning products on our Facebook adspy today!
Find winning products on our Tiktok adspy today!
Find winning products on our Pinterest adspy today!
Find winning products on our Facebook adspy today!
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