The EU’s rules for distance selling are complex. Without a sales tax solution in place, customers can get a nasty surprise upon delivery. For example, Dutch dropshippers might have to pay import VAT and handling charges for customs clearance upon delivery to their end consumers. To avoid this, it’s important that the price the consumer pays on your website is exclusive of VAT.
1. Choose A Supplier
When selling products to customers outside the European Union, it’s important to know that VAT compliance takes on a new dimension. The responsibility for paying customs duties and taxes at the border is assigned to whoever is designated as the importer of record for a shipment. This could be the supplier, the dropshipper or even the end customer. For this reason, it’s important to choose a VAT free supplier and be clear with them about how you intend to manage tax compliance.
The VAT settlement process in dropshipping is influenced by a variety of factors, including the type of product being sold and whether the business meets the conditions for VAT exemption (commercial intermediation or not). To make sure that your business stays compliant with EU regulations, get expert advice from a VAT specialist.
2. Set Up Your Account
In recent years, the btw vrij dropshipping model has gained popularity due to its advantages for retailers – no inventory is required and no warehouse space needed. However, VAT related issues are complex and require guidance from experts. For example, in order to comply with EU tax laws, remote sellers need to declare their sales with local tax authorities unless they’ve passed a threshold of EU-wide sales or are registered with the One-Stop-Shop (OSS) system managed by their home country.
The process of determining which VAT rate should apply is also complicated by the fact that you are dealing with cross-border transactions and different taxation rules depending on whether your customers are located in your own or other European countries. For this reason, it’s a good idea to inform your consumers about the import process and make sure the price they pay on your site is exclusive of VAT to avoid them paying double taxes.
3. Start Selling
Most e-commerce platforms include VAT in their price, so the end customers don’t pay it directly. The money goes to the businesses in the chain, who hand it on to their government. When it comes to btw vrij dropshippen, the process is slightly different. The tax system of each country is unique. For example, it is possible to include taxes in the product prices in Germany, but not in France, even though both countries have a similar EU VAT rate. The best way to handle this situation is to register your business for VAT in the country where your products are shipped to customers. hellotax can help you with this.
In addition to the VAT rate, there are many other taxes to consider. It is important to have impeccable accounting procedures and consult with experts in this field. This will ensure you comply with all the rules and avoid fines.
4. Get Started
If you are selling to end customers within the EU, then you need to collect sales tax. The VAT rate varies by country, and you will need to be registered for VAT. To register, you will need a valid tax ID (also known as resale certificate). hellotax can help you with this. However, sales tax is only one type of consumption tax that you will need to manage. You will also need to pay income tax, which varies by country. To understand your taxes, it is helpful to speak to a tax advisor.
Conclusion
VAT free dropshipping is a popular retail model that offers entrepreneurs enhanced flexibility and the possibility to sell an endless array of products. However, the model also comes with complex VAT related matters that need to be managed. The new EU VAT rules that took effect in July 2021 have changed the way sellers manage their VAT settlements. They can now register for OSS and file one tax report, which will then automatically distribute VAT per consumer country.