Can you avoid paying EU VAT when dropshipping?

[ShillGates]

If the company doesn't have to charge domestic vat then it doesn't on sale to other countries either, on these first 10k.

Not true - for non eu domestic companies register oss immediately for eu business the first 10k can go on your regular domestic return but even the first sale goes on there

I am not going to read all and spell this out for you, but you can read the article, which i posted for simplicity sake rather than the full eu legal text. It is clear you only want to read what you hope to be true... ill quote from the article and hope you understand.

"From 1 July 2021, this registration threshold simplification will be withdrawn. Cross-border sellers will have to charge the VAT rate of the customer’s country of residence from their first sale and remit it to the foreign tax authorities."

Now next time , do some research and come up with some backed reason why you think your position is true.

 

[fshore]

Not true - for non eu domestic companies register oss immediately for eu business the first 10k can go on your regular domestic return but even the first sale goes on there

I am not going to read all and spell this out for you, but you can read the article, which i posted for simplicity sake rather than the full eu legal text. It is clear you only want to read what you hope to be true... ill quote from the article and hope you understand.

"From 1 July 2021, this registration threshold simplification will be withdrawn. Cross-border sellers will have to charge the VAT rate of the customer’s country of residence from their first sale and remit it to the foreign tax authorities."

Now next time , do some research and come up with some backed reason why you think your position is true.

The threshold is explained in the link I posted. Anyway, it's for max turnover of 10k so not very useful for most people.
Previously the threshold was 100k per country (every country had different thresholds) while now it's 10k for total sales to all countries, before you have to register for OSS.

 

[ShillGates]

The threshold is explained in the link I posted. Anyway, it's for max turnover of 10k so not very useful for most people.
Previously the threshold was 100k per country (every country had different thresholds) while now it's 10k for total sales to all countries, before you have to register for OSS.

there is no such 10k threshold for distance sales. the threshold refers to WHERE you report these sales not IF you report them or not. Upto 10k is reported on your normal domestic vat return FROM THE FIRST SALE IF you are a French company selling into other countries B2C. So for the first 10k you charge french vat. OSS is compulsory if selling more than 10k and thereafter you charge as french company, the german vat, belgium vat etc etc.... OSS is to simplify this, and indeed you can be kicked out of OSS, thereby technically you need to go and get a vat number in each country separately.

The above is for EU resident businesses only!.

IF outside EU - you need to register somewhere for vat and pay from the FIRST sale as you do not have a "domestic vat" availability.

as for enforcement, this currently does not happen so good luck, but bear in mind if found out, they will look at historic records.

So yes as myhand says, use and thrash, thats fine but from 2024 January there is quarterly reporting, so you only have in effect 3months before someone comes knocking.

These measures are implemented exactly for the reasons to reduce fraud in the vat side in eu. so yes they are quite draconian and "well" though out.

again your mileage may vary so good luck. Tbh how anyone would enforce anything against a chinese business is beyond me - but maybe the chinese payment processors are not so lenient

 

[fshore]

Yes, and if you don't charge vat in your domestic country because you're under the registration threshold then you don't charge vat on these 10k. How do you propose to report these transactions if you're not registered for vat? Anyway, it's not a strategy as its only for 10k.

 

[JohnnyDoe]

How about to setup a shadow company and trash it once things are going crazy.

This is the best way to go to jail, potentially for a long time. It’s called cheating the public revenue (up to life in prison in the UK), or “frode ai danni dello stato” in Italy.
It’s the method routinely used by the mafia, in particular the ‘Ndrangheta.

 

[Hydrox]

How about to setup a shadow company and trash it once things are going crazy.

Where would someone best setup the shadow company?

 

[GPT]

TS starts with mentioning dropshipping (physical products) and then casually starts to include coaching (services).

The services industry is a whole different game with different rules. Don’t mix those. It will only cloud the answers which lead to terrible / costly decisions.

 

[sergeylim88]

don't you have to charge vat for services too, just like for physical goods?

 

[GPT]

don't you have to charge vat for services too, just like for physical goods?

In principle it’s the same for both products and services. In practice there are a lot of differences between the two. Services for that matter are easier to work with. In some cases products are limited to all sorts of restrictions that need to be taken into account. You don’t have that with services.

For services you can also easier play around with place of delivery, especially when it’s online delivery. Tax shopping in that sense is still an option.

 

[nicowillism22]

It's great to hear about your success in your first year of dropshipping! While VAT can significantly impact your profit margins, there are a few legal strategies you can explore to minimize or manage the impact:

### 1. **Increase Prices Strategically**
- **Adjust Prices**: Consider increasing your prices slightly to account for VAT without deterring customers. For example, focus on highlighting value through premium product positioning, exceptional customer service, or added perks (e.g., free shipping).
- **Offer Bundles**: Bundling products can make the price increase less noticeable to customers.

---

### 2. **Optimize Your Supply Chain**
- **Use a Fulfillment Center in the EU**: Shipping your products in bulk to an EU-based warehouse can reduce shipping costs and handling fees. Additionally, customers often prefer shorter delivery times.
- **Declare Import VAT for Deductions**: When importing goods into Germany, ensure the VAT paid on imports is properly accounted for. Import VAT can often be reclaimed as input tax when filing VAT returns.

---

### 3. **Leverage Input VAT Deductions**
- As a VAT-registered business, you can deduct VAT paid on business expenses (e.g., inventory, shipping, software, advertising) from the VAT collected on sales. Ensure you're keeping detailed records of all invoices.

---

### 4. **Utilize VAT Thresholds in Other Countries**
- **Sell to Other EU Countries**: Explore selling to other EU markets where VAT thresholds vary. Registering for VAT in those countries may allow you to delay or minimize VAT obligations depending on local rules.

---

### 5. **Explore Tax Advisors and VAT Schemes**
- **Consult a VAT Expert**: A German tax advisor can help you explore options like VAT special schemes or identify additional deductions you might not be aware of.
- **Small Business Scheme (Kleinunternehmerregelung)**: While this might not apply to your case anymore, consulting with an expert could reveal other similar exemptions based on your business structure.

---

### 6. **Diversify to Non-EU Markets**
- While selling to the US or other non-EU countries (e.g., Canada, Australia) avoids VAT, ensure you research import duties and shipping costs in those markets. Build relationships with local influencers or e-commerce platforms to establish a foothold.

---

### 7. **Optimize Marketing and Advertising**
- Increase sales volume by investing in targeted advertising or offering promotions. While profit margins might thin slightly, higher sales volume could offset the Calculate VAT impact.

---

### Next Steps:
1. **Engage a Tax Consultant**: This is crucial to ensure compliance and maximize deductions.
2. **Conduct Market Research**: Identify new customer segments or geographies.
3. **Run Financial Simulations**: Assess how pricing and marketing adjustments could affect your bottom line.

By combining these strategies, you can manage VAT obligations while maintaining profitability in the German market.

 

[nicowillism22]

It's great to hear about your success in your first year of dropshipping! While VAT can significantly impact your profit margins, there are a few legal strategies you can explore to minimize or manage the impact:

### 1. **Increase Prices Strategically**
- **Adjust Prices**: Consider increasing your prices slightly to account for VAT without deterring customers. For example, focus on highlighting value through premium product positioning, exceptional customer service, or added perks (e.g., free shipping).
- **Offer Bundles**: Bundling products can make the price increase less noticeable to customers.

---

### 2. **Optimize Your Supply Chain**
- **Use a Fulfillment Center in the EU**: Shipping your products in bulk to an EU-based warehouse can reduce shipping costs and handling fees. Additionally, customers often prefer shorter delivery times.
- **Declare Import VAT for Deductions**: When importing goods into Germany, ensure the VAT paid on imports is properly accounted for. Import VAT can often be reclaimed as input tax when filing VAT returns.

---

### 3. **Leverage Input VAT Deductions**
- As a VAT-registered business, you can deduct VAT paid on business expenses (e.g., inventory, shipping, software, advertising) from the VAT collected on sales. Ensure you're keeping detailed records of all invoices.

---

### 4. **Utilize VAT Thresholds in Other Countries**
- **Sell to Other EU Countries**: Explore selling to other EU markets where VAT thresholds vary. Registering for VAT in those countries may allow you to delay or minimize VAT obligations depending on local rules.

---

### 5. **Explore Tax Advisors and VAT Schemes**
- **Consult a VAT Expert**: A German tax advisor can help you explore options like VAT special schemes or identify additional deductions you might not be aware of.
- **Small Business Scheme (Kleinunternehmerregelung)**: While this might not apply to your case anymore, consulting with an expert could reveal other similar exemptions based on your business structure.

---

### 6. **Diversify to Non-EU Markets**
- While selling to the US or other non-EU countries (e.g., Canada, Australia) avoids VAT, ensure you research import duties and shipping costs in those markets. Build relationships with local influencers or e-commerce platforms to establish a foothold.

---

### 7. **Optimize Marketing and Advertising**
- Increase sales volume by investing in targeted advertising or offering promotions. While profit margins might thin slightly, higher sales volume could offset the Calculate VAT impact.

---

### Next Steps:
1. **Engage a Tax Consultant**: This is crucial to ensure compliance and maximize deductions.
2. **Conduct Market Research**: Identify new customer segments or geographies.
3. **Run Financial Simulations**: Assess how pricing and marketing adjustments could affect your bottom line.

By combining these strategies, you can manage VAT obligations while maintaining profitability in the German market.

These steps might help you.

 

[lagloriacubana]

These steps might help you.

Thanks ChatGPT