Europe’s VAT and customs laws are set to undergo major changes in 2021. As a result of Brexit and a new EU VAT package, the traditional e-commerce dropshipping model may be weakened. Taxes on imported goods, such as import VAT, duties, and declarations, are eroding sellers’ margins and causing problems with fulfilment, according to the company. Are there any advantages to the new Import One Stop Shop?
What exactly dropshipping means?
The dropshipping in which a customer places an order on a website or platform, but the order is fulfilled by a third party
- Your online store receives an order from a client.
- Your dropshipping supplier receives the order from your store automatically.
- Your customer’s order is prepared by the dropshipping supplier.
- Your customer receives their order directly from your dropshipping supplier.
With the help of e-commerce platforms such as Etsy and AliExpress, Amazon dropshipping has grown tremendously in the past five years. Dropshipping is not limited to an online store that sells products it purchases from a third party when it comes to VAT in the EU. All direct online sales to customers outside the EU are included in this category.
Dropshipping hurdles to be resolve
In the European Union, dropshippers face three major obstacles:
- Import delays and complications
- Margins are weakened by tax costs that are unknown.
- Experiences with customers that are less than satisfactory
As a result, it can be difficult to import goods into the country where the customer is located, which creates friction in the fulfilment model. A variety of customs forms and declarations must be completed, and customs representatives may be required, resulting in the delay or return of several shipments.
Dropshippers will also have to deal with an increased cost of sale as of July 2021, when VAT and duties will be required on low-value items that were previously exempt. VAT rates vary widely across the EU, making it difficult to determine what to charge at the point of sale, regardless of whether they pass this cost on to the customer.
According to the seller’s shipping arrangements, deliveries can be significantly delayed, and in many cases the buyer will have to pay VAT or duties before the goods are finally delivered – which makes for an uncertain and irritating experience on the part of the buyer.
A dropshipper’s entry into the EU will be smoother and more pleasant thanks to the new IOSS: Imports will be frictionless and free of import VAT or duties, and the customer experience will be greatly enhanced.
Dropshippers who are interested in applying for the IOSS VIP status should contact TAS Consulting today to learn more about the process.
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