To start your dropshipping in Europe, I know there are a lot of questions that come into your mind like business registration, taxes and where to find the right suppliers. Well, in this article, I’ll do my best to give you answers to the above questions and hoping that I can help you to start your own dropshipping business.
PART 1: BUSINESS REGISTRATION
Question 1. Do I have to register my business?Like other countries, yes, you have to register your business name to your local country if you don’t want to have negative consequences. Basically, there are three types of businesses that you can choose from.
- Sole Proprietorship, a business owned by only one person
- Partnership, a business owned by two or more persons who contribute resources into the entity. The partners divide the profits of the business among themselves.
- Corporation, a business organization that has separate legal personality from its owners. Ownership in a stock corporation is represented by shares of stock.
The type of business will be depending on your goal and how many owners will be part of the business. But most dropshipping owners are in Sole Proprietorship. For more info on registering your business and some tax questions, you can refer to countries’ official website for taxation and business registration. For example in the UK, you can check this Register for and file your Self Assessment tax return link.
PART 2: VAT AND IMPORT TAX
Question 2: What is VAT?
VAT is a form of consumption tax , it is being applied to the purchase of goods and services and it may differ to which country your business is registered and where your customers are located.
When it comes to VAT, the seller (your business), you can consider yourself as a kind of tax middleman. Your customers pay you for the VAT and you (your business) pays some or all of it to the government. So basically, it’s not your money paying for the VAT because that’s your customer’s money and you are just collecting them to submit to the government. So, one thing always stays the same. The end customer always pays the tax, not the retailer or even the supplier because the end customer is the one who’s actually consuming the end product since VAT is a form of consumption tax.
In the EU, there are 28 states and each state may have different tax charges. They set broad VAT rules and has the minimum standard VAT rate at 15%. Otherwise, each state is free to set their standard VAT rates. For example, the standard VAT rate in France is 20% while the standard VAT rate in Spain is 21%. As what I said earlier, VAT depends on what country or state your business is registered.
So if you don’t charge VAT to your EU customers, then it will be your money paying for the government because the government will still expect the taxes from you, whether you knew about the taxing system or not. That’s why it’s very important to know how to charge VAT
But when it comes to dropshipping, the popular question is a matter of who charges the VAT from the customer. Is it you, the online store owner, or your supplier who delivers the order to your customers? For example, when you import goods from China, you can’t pay the VAT directly to your supplier. This is because Chinese suppliers or businesses are not VAT registered to the EU and China has a different tax system. To dig deeper about this, let’s answer the following questions…
Question 3: Do I need to pay VAT to my suppliers?
Well it depends if your supplier is registered inside or outside the EU;
If your business is EU VAT-registered and your supplier is also based in EU, then VAT on these B2B purchases is managed through the reverse-charge mechanism. So with this, you don’t have to pay the VAT to your supplier and you have to pay the VAT directly to the government. The EU government implemented this system to prevent tax fraud. For example, the EU loses millions of euros each year because the taxes collected by the suppliers are not being paid to the government.
If your business is EU VAT-registered and your supplier is based outside the EU, as with the example mentioned above, your supplier is from China, then you can’t pay them for the VAT because they have different tax system. But keep in mind that your customers might pay custom tax if the value of the goods imported to EU is more than 20 euros depending on the country in EU.
Question 4: Do you need to charge Sales Tax from your customers?
If your business is registered in the EU, then you must charge VAT on each EU item purchased by your customer. But the tax rate will depend on how much you sell every year because each EU state has its own Distance selling EU VAT thresholds. For example, a Spanish retailer sells accessories to German customers. Spain has a € 35,000 annual threshold with 21% VAT rate while Germany has an annual threshold of € 100,000 with 19% VAT rate. If the Spanish retailer sold more than € 100,000 to his German customers, then he needs to apply for a non-resident VAT trader in the country which is Germany. Then, instead of charging a 21% VAT rate, he will then charge a VAT rate of 19% then tax goes to the German government instead of the Spanish government.
If your business is located outside the EU: If you are a foreign company and you’re selling in EU, you don’t need to register for VAT. Once the amount of your total goods per year exceeded the VAT registration, then you must apply for a VAT number. For example, if you are selling in France and the annual threshold is €35,000 (around 38,000 USD) and let’s say you exceeded the threshold, then you have to pay the 20% VAT to the France government. Whether you charge your customers or not for the VAT once they purchased the goods, you have to pay for the VAT.
Question 5. Do I need to pay for Import VAT?
Let’s say your supplier is from China and your customers is from France. So regarding the Import Tax, basically you don’t have to worry about this because customer needs to pay for the Import VAT. Good thing about this is that most dropshipping items are excluded for the VAT because dropshipping items have less value and most dropshipping suppliers declared less value when they shipped the products. Under the EU rules, if the value of goods are between 10-20 euros, these are exempted for the Import Tax. But just in case the declared value is more than 20 euros, your customer might subject to pay for the Import Tax.
PART 3: EUROPE DROPSHIPPING SUPPLIERS
Now that we already know if we need to register our business and what are the taxes that you need to be familiar with, now let me give you some sites and suppliers that can be your dropshipping partners in EU.
- Brands Distribution – Brand Distribution is a wholesale platform leader in online B2B designer clothing and fashion accessories distribution. What they offer are dropshipping, affiliate program and e-franchising. Since they launched in 2009, they have accumulated a great deal of experience in the fashion business and also in developing innovative logistics solutions. What they have are 120+ fashion brands, personal assistance from their sales manager, they also ship for more than 170+countries around the world and they have an average of more than 60,000 items per year. Once you have registered with them, they will allow you to have exclusive access to the biggest selection of wholesale fashion clothing for traders and online retailers and to special services such as personalized promotions, purchasing assistance and dropshipping.
- Bigbuy – Bigbuy is one of the pioneers for dropshipping in Europe. The good thing about Bigbuy is that you can customize your company name and image when it comes to orders. So that you can build your own brand in your business. As of now, it has thousands of distributors and mostly in Europe.
- E-nuc – If you’re looking for electronic items supplier in Europe, you must check E-nuc because they are one of the best electronics suppliers out there! Based on their slogan, they are the largest catalog of spare parts for laptops, telephones spare parts, mobile phones, inks and toners, consoles, accessories for consoles, video games, and many more!
- Dropship Clothes – Dropship-Clothes.com is a leading international manufacturer and marketer of women’s clothes. They have top sewing facilities, using unique fabrications, laces, and trims from over 650 resources and employing the experienced workers, they have found their brand “Dear-Lover”. With having an international network of distributors, dropship-clotes.com sales in more than 130 countries, and have over 9,000 leading retailers. Now, dropship-clothes.com is a top women’s fashion clothing manufacturer and supplier brand all over the world. This fashion clothing website is fit for medium and small retail businesses. You can dropship from them and make the payment online directly.
- Tuscany Leather – This company made their own name for leather products and they are well known worldwide and they provide shipping to up to 190 countries worldwide. So if you trying to become a drop shipper for this brand, yes you can! The good thing about this company is that they always have support to help you with your orders. All you need to do is to send them your orders and they will take care of everything.
- Printful – Now, if you’re looking for a print on demand drop shipping supplier, then you have to check printful.com. With them, you don’t have to invest in printing equipment, storage, or inventory because they can handle all the fulfillment and shipping to your customers so that you can spend more time on running your business. The good thing about them is that they send your products under your own brand. Also, once you signed up with them, there will be no sign-up fees, warehouse fees, or even stock inventory.
- Griffati – They are not just a wholesale purchase supplier but they are also offering now a dropshipping without any minimum order. The good thing about Griffati is that they don’t charge warehouse costs or any warehouse logistics and you can have a profit margin from 75% up to 100%! One of the advantages of this company is that they offer a lot of well-known brands like Armani Jeans, D&G, Guess, Tommy Hilfiger, Gant and they have more than 300+ brands that you can choose from!
- CJ Dropshipping – CJ Dropshipping is one of the most popular suppliers and fulfillment based in China and most of CJ products are cheaper compare to other suppliers like AliExpress. So when you do with CJ, it’s like combining AliExpress and Oberlo. The good thing about with CJ is that they don’t charge you any subscription fees, monthly fees, warehouse fees, they don’t even have any minimum order so you can order for even a single item and they don’t charge any hidden fees. The only charge that you have to pay is the product price plus the shipping fee. And sourcing products are free and if you have any questions along the line, you will have your personal agent and CJ has customer support for 24/7. I hope this article really helps you and answers some of your questions. If you still have some other questions that I didn’t tackle in this post, please let me know so I’ll do research about it and will give you a rightful answer.
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