Dropshipping VAT Question
As accountants for Amazon Sellers and Dropshippers, we often get asked questions on VAT. In the interests of saving people time, we thought it would be useful to begin sharing the questions and the answers for everyone.
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The original question:
Hi Ecommerce Accountants
I am about to start an e-commerce business selling physical goods on Shopify worldwide (US, Canada, Australia, UK, Europe including EU countries) with a dropshipping model.
I am employed at the moment and am planning to register as self-employed.
How do I go about the whole VAT tax thing when selling in UK and other EU countries?
Do I have to display the prices incl VAT and charge that tax or not?
Nice to meet you and thanks for the email.
Congratulations on taking the first step on your ecommerce journey, looking forward to being able to support you in it.
Firstly, where are you based and where are you planning on registering as self-employed? Do you need any help with this?
Secondly, “how do I go about the whole VAT thing” is quite a wide question, but I will try and explain some things in general terms for you.
The reason that I am asking “where are you based?” is that if you are based in the UK, then you do not need to register for VAT until you cross the VAT threshold (currently £85,000 GBP) of taxable turnover here.
However, if you are based overseas, then you will need to register for VAT in the UK as soon as you are making taxable supplies in the UK.
Therefore if you are drop-shipping to a UK consumer and you are not based in the UK, then you will need to automatically register for VAT in the UK, no matter how high (or low!) your turnover is. If you are based in the UK then you will need to monitor your sales and register as soon as you think you are going to cross the VAT threshold.
Each other EU country has different rules and I am afraid that I cannot go into each of them here as our services currently only cover UK VAT. A good online resource for EU for can be found here.
If you are looking for help with EU VAT I would definitely recommend speaking to an accountant who is based in (or very familar with) the country that you wish to sell in. If you need help with this then please let me know which country you are looking for as we do have a network of accountants that we can potentially refer you to.
Regarding your question on whether or not to include vat in the price.
In the EU prices usually include VAT, unless otherwise stated. If you state that you are including it then you will need to collect it and pay it to the local tax authority (in the UK this is HMRC).
Please get in touch if you have any further questions or if you want help registering for VAT in the UK.
End of message.
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