Dropshipping and VAT

Dropshipping raises questions ever more often, including from very young entrepreneurs. Does the dropshipper pay the import VAT? A short summary of the rules and the pitfalls.

Dropshipping is simply the activity of a trader (B) who buys from a supplier (A) and has A deliver the goods directly to B's customer (C). With the dropshippers we speak to, the purchase is always outside the European Union, usually in China, with A sending the goods by post or courier directly to a private individual C at an address in a member state.

Two supplies

For VAT there are two supplies: A to B and B to C. When the goods enter the EU, import VAT must in the first instance be paid to customs. The question we always get from dropshipper B is: do I have to pay that import VAT?

The Dutch Tax Administration's position

Their answer is no. In their view both supplies take place outside the EU. The import VAT, charged by customs to the courier, must be paid by the private individual on delivery in order to receive the parcel.

Parcels up to € 150

Dropshippers who want to avoid surprising the customer register for the import scheme, also known as the Import One Stop Shop. For parcels below € 150 no import VAT is then payable, but VAT becomes due in the customer's member state at the moment the online order is paid for. The Dutch dropshipper pays the VAT for all those supplies within the EU to its own tax authority.

Parcels above € 150

Above that threshold import VAT is always payable. Where the dropshipper does not want the customer to bear it, supplier A will have to declare the dropshipper as the importer. The dropshipper can then reclaim the import VAT.

VAT of the customer's member state must then be accounted for on the supply to that customer. Where the dropshipper registers for the One Stop Shop at home, all EU VAT can be paid to the Dutch tax authorities through that return.

A word of caution

Others disagree with the Dutch Tax Administration that both supplies take place outside the EU. In their view the dropshipper brings the goods into the EU and must therefore account for import VAT or for VAT of the customer's member state. In our view a dropshipper can rely on either position, at least as far as the Netherlands is concerned. A tax authority in another member state may take a very different view.

The consequences can also differ where the dropshipping route departs from what is described here, or where the goods are offered through a marketplace such as Amazon or AliExpress. Always take advice on dropshipping so that you avoid unwelcome VAT surprises.