EU VAT July 2021 And Dropshipping | What We Know About the Changes and Impact on China Fulfillment

Hey everyone, Dayu here from EcommOps. This video discusses the new EU VAT changes coming into effect in July 2021.

Are you a Shopify, WooCommerce store owner or an AliExpress dropshipper selling to customers in the EU? Are you worried about how the new EU VAT changes effective in July 2021 will affect your dropshipping business? Similar to the UK VAT changes that took place on 1 January 2021, the new EU VAT rules will also drastically change the tax regulations for online sales.

Ever since the UK VAT changes took place, we’ve been getting a lot of questions from our subscribers and clients about how the upcoming EU VAT changes are going to affect their Shopify stores or Amazon ecommerce business.

In this video, we summarized the big changes of EU VAT rules that are already known. Some areas of this VAT reform are not completely clear yet. Just as last time, many things are still subjected to changes up until the very last minute. So stay tuned and subscribe to us if you wish to get more updated information on this topic later on.

So what is going to change this time around? Three major categories:
1. Removal of the Distance Selling threshold for VAT and introduction of One Stop Shop (OSS)
2. Removal of low-value import VAT exemption
3. Marketplaces deemed responsible for collecting VAT.

First of all, currently each EU country has a selling threshold under which a foreign company is not responsible for VAT, somewhere between 30,000 to 100,000 euro. This will be removed in July 2021.

The withdrawal of the EU distance selling threshold is obviously not positive. Previously you were able to avoid VAT obligations under the thresholds for each country, but after July 1st it will apply to all sales.The One Stop Shop technically makes filing for VAT a bit more convenient, but you still pay VAT depending on where the goods are sent.

Secondly, currently sellers selling goods online directly to EU consumers can import VAT-free if the consignment of good(s) is valued at €22 or below. This too will be removed in July 2021.

EU and non-EU sellers will be required to charge VAT at the point of sales for consignments of goods whose intrinsic value is €150 or below. Sellers will charge VAT at the rate of their customer’s EU country of residence at the point-of-sale on the website. Sellers can use the delivery address of the customer to determine the country VAT rate. No VAT is due at the point of import in this case.

For consignments exceeding the €150 IOSS threshold, the import VAT must still be paid to customs. This could still trigger a regular VAT registration in the country of importation.

In addition, marketplaces such as Amazon, AliExpress etc. become the deemed supplier when they facilitate certain cross-border B2C transactions of their third-party sellers. They will therefore be liable to collect, report and remit the VAT due from the consumer. This applies to both EU based and non-EU based sellers who use a platform to sell to EU consumers.
Some points to take note of:

1. The VAT facing EU customers should be charged to the intrinsic value of the goods. So if you were offering free shipping with shipping fees included in the price, then you will need to pay VAT on the whole selling price.

2. The EU has a minimum VAT rate of 15%, however, each member state is free to decide its own VAT rate. The actual amount of VAT charged is dependent on your customer’s shipping address within the EU.

3. It is still unclear how this would work for dropshipping platforms and agencies. Unlike the UK VAT system, there is no clear mechanism for reclaiming VAT yet. So whether or not dropshippers will be double charged is not yet clear.

4. Whether we as a fulfillment agent should be responsible to collect VAT is also unclear. We will however continue to try and figure this out, so we can help you understand this better.

Even though the changes sound quite strict, they won’t kill your business. We know this for a fact because local EU sellers have been paying VAT the entire time. Besides, the market always adapts. If everyone starts having to charge VAT/include VAT in their prices, market prices will just adjust.

In the end, tax is just a lifestyle. “In this world, nothing can be said to be certain, except death and taxes.” – Benjamin Franklin

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[Sarahill]

Haha that’s my song in the background. Thanks for the information

[SukumarDevaguptapuLife-Smiles]

Kudos.. to your presentation...! VAT paid by the importers on import would always be adjusted when such importers sell down the supply chain -- it would/could not be otherwise -- as the product will become expensive to the ultimate consumer. But what will happen if a seller ships direct from Shanghai to a buyer in Paris -- and uses a courier service. Will this seller need to register under OSS and include VAT in the export invoice ?

[rory]

Wow, the EU has just killed Aliexpress. Even goods shipped from EU warehouses are taxed.

[julianzagar]

Hey Dayu, great content again as usual, currently I am facing this exact problem. I am dropshipping from China to Europe with an Agent and it is working very well. Now coming July with the new VAT Rules coming into effect for all countries of the EU though, I will face higher prices for my products because of the toll and I think my shipping times (already 2 weeks) will increase by many days because the clearance of the customs duty for every single product will take much longer. I am currently searching for a solution to start ordering in bulk to a warehouse here in Europe and then fulfilling from this warehouse, but I haven't found a reliable company for that yet. Also I am kind of unsure if this way of fulfilling my orders will be way more expensive and if I can even generate profits anymore with this new costs. Therefore I ask you, do you maybe have an idea of how to encounter this problem? Maybe you could also do another video regarding this topic since I think many other EU dropshippers are facing this problem currently. As always thank you in advance, looking forward to your reply. Best regards and stay healthy!

[ahmedboudaya]

VAT should be included in total price only Royal Mail is not : Which delivery service are you using?
If your business uses the Royal Mail for delivery to your customers, you will not pay VAT on the cost of postage, and hence you will not be able to reclaim VAT. The reason for this exemption is that Royal Mail are classed as the “universal postal service provider in the UK” and they are subject to price and regulatory control.

Businesses using courier and delivery services other than the Royal Mail, can expect to be charged VAT on delivery charges.

[miahandshy]

Thanks for explaining this so clearly! I watched accountant videos explaining the same thing and didn't get much smarter. Your video makes it perfectly clear.

[DylanHGN]

So we all gotta pay VAT on products we get from china? And do we only pay these type of taxes if we ship to the EU or if you live in the EU and not if we ship to like Australia. Great vid💎

[someonewhocantmakeuptheirm]

I'm from France and i shopped from Aliexpress yesterday for the first time on my life and i don't know what to do with the new statute of EU of 1 july . my question is :am i supposed to declare the item that i bought or something like that or just wait for the item to be received ?btw i payed the VAT

[YuliaShuk]

Hi. May I ask you why at 8.42 you are providing calculation that for the free shipping the VAT payment will be more if for the VAT calculation word widely the shipment cost is anyway is taken into account for the VAT calculation and it doesn`t matter the shipment is in the price and indicated as free of charge or provided additionally....?

[danie-stefan.gabor]

Hey, nice video!

I have a question:
So I do dropshipping in Germany, I found a product that has "7 day shipping" on AliExpress. I selected the Poland shipping method which is in EU, not from China. Does it still affect it in some kind of way?

[freshrosaparks]

@EcommOps great video but it's pitty that you don't explain how your uk client have adapted atfer the UK VAT change. What is the real change between before and after for your cleint ??

Thanks

[ousmanetoure]

I cannot get product from china anymore .I live in canada they always say that the products haven’t been shipped to canada.

[wilcodenbrok]

At the moment, no EORI number is required at the customs for UK. Also my fulfillment center seems to have a EORI number as well. Question is: Why would I pay VAT if it passes the border just fine without my EORI number?

[wandajenkins]

Thanks! How is that different from ali and Fulfillman?

[AndreaSanselicio]

If a Hong Kong shop ship an 200usd item as a gift with 20usd value After july to Italy i would have to pay the vat tax even if its a gift? I would be at risk with the shipping Company may check the item ? Could they destroy the item or returning It to the seller?

[huckleberryfinn]

What prevents a seller to declare shipping costs in the invoices but not in the store? Or even a lower price on the invoice than in the store?

[marduk]

Let's hope it will be postponed again

[someonewhocantmakeuptheirm]

I'm from France and i shopped from Aliexpress yesterday for the first time on my life and i don't know what to do with the new statute of EU of 1 july . my question is :am i supposed to declare the item that i bought or something like that or just wait for the item to be received ?btw i payed the VAT.

[someonewhocantmakeuptheirm]

I'm from France and i shopped from Aliexpress yesterday for the first time on my life and i don't know what to do with the new statute of EU of 1 july . my question is :am i supposed to declare the item that i bought or something like that or just wait for the item to be received ?btw i payed the VAT .

[someonewhocantmakeuptheirm]

I'm from France and i shopped from Aliexpress yesterday for the first time on my life and i don't know what to do with the new statute of EU of 1 july . my question is :am i supposed to declare the item that i bought or something like that or just wait for the item to be received ?btw i payed the VAT