Dropshipping is a retail fulfillment method where a store doesn’t keep the products it sells in stock. Instead, when a store sells a product using the dropshipping model, it purchases the item from a third party and has it shipped directly to the customer. At the same time, the store adds a surcharge on top of the supplier’s price in order to achieve a profit margin.
As a result, the seller doesn’t have to handle the product directly. Most of the time the seller orders the products from an online marketplace which is usually located in China.
With dropshipping, it is important to map out the contractual relationships in order to determine whether and by whom Dutch or EU VAT is due. This must show by whom or on whose behalf the goods are imported into the Netherlands.
Usually, the situation with dropshipping is as follows. The webshop concludes agreements with its customers that mean that the webshop is obliged to deliver goods to them. The webshop orders these goods from suppliers established outside the EU, mainly in China, who send the goods directly to the customers of the webshop. There is no contractual relationship or delivery obligation between the foreign supplier and the ultimate customer. The goods are entered in the name of the customers of the webshop.
From a VAT point of view, goods are delivered from the foreign supplier to the webshop as well as from the webshop to the consumer. Transport from China takes place in the context of the transaction between the webshop and the consumer. After all, on the basis of the delivery address, the consumer indicates where he or she wants to receive the goods.
In short, the webshop does not owe Dutch VAT insofar as it is contractually stipulated that the goods are imported in the name and on behalf of the consumer. Incidentally, this also means that the consumer is then responsible for the payment of VAT in the Netherlands for products with a value higher than € 22.
With the introduction of the new e-commerce legislation, the import exemption for goods up to a value of € 22 will expire. VAT will therefore be due on every import unless the web shop will make use of the new ‘import regulation’. When applying the import regulation, the webshop obtains a special IOSS (Import One Stop Shop) VAT number and a VAT exemption applies on import for parcels with a value up to € 150.
Correspondence with the Tax and Customs Administration shows that with dropshipping it is important to map out the contractual relationships in order to determine whether and by whom Dutch VAT is due. This must show by whom or on whose behalf the goods are imported into the Netherlands.