Advice Needed: International VAT in a Dropshipping Model with Fulfillment Agency (China Agent)
Hi everyone,
I run an ecommerce business that is somewhat like the dropshipping model. I'm based in the Netherlands. Here's how I operate:
1. Customers from the US buy clothing pieces from my website. The money goes directly to me.
2. I pay a fulfillment agency in China to handle the orders. The agency buys the products from a Chinese brand, who is in agreement with me that I can sell their products on my website. The fulfillment agency then ships the product to the customer's address.
3. The fulfillment agency takes care of all import taxes and duties, they are owner of the product until it reaches the customer's country.
From a tax perspective, my business becomes the owner of the product only when it reaches the customer's country. This makes all my sales 'domestic deliveries', even though my business is not based in the customer's country. This situation raises some questions about VAT for me.
I currently only sell to US states due to their nexus laws, where non-resident businesses making domestic sales still have a threshold before needing to register for VAT (sales tax). As long as I stay below the threshold in each state I don't need to worry about registering for VAT there.
However, I'm looking to expand to other countries. In the EU, I would have to register for VAT in each country from the very first sale. This is something I would rather stay away from for the time being.
I'm trying to understand how this applies in other countries like Canada, Australia, Mexico, Japan, Korea, etc. Each of these countries have their own VAT laws and regulations, and I am looking for those where I don't have to register for VAT from the first sale because of a threshold for non-resident businesses making domestic sales, like in the US. Does anyone have experience with this kind of situation, or knows of any resources that could help me understand international VAT better?
While I've been talking with tax advisors, it seems like most of them know the tax rules of specific countries really well, but not so much when it comes to international stuff. So, I'm hoping to get some advice or insights from people who might've dealt with a similar situation. Any advice or insights would be really appreciated!
I run an ecommerce business that is somewhat like the dropshipping model. I'm based in the Netherlands. Here's how I operate:
1. Customers from the US buy clothing pieces from my website. The money goes directly to me.
2. I pay a fulfillment agency in China to handle the orders. The agency buys the products from a Chinese brand, who is in agreement with me that I can sell their products on my website. The fulfillment agency then ships the product to the customer's address.
3. The fulfillment agency takes care of all import taxes and duties, they are owner of the product until it reaches the customer's country.
From a tax perspective, my business becomes the owner of the product only when it reaches the customer's country. This makes all my sales 'domestic deliveries', even though my business is not based in the customer's country. This situation raises some questions about VAT for me.
I currently only sell to US states due to their nexus laws, where non-resident businesses making domestic sales still have a threshold before needing to register for VAT (sales tax). As long as I stay below the threshold in each state I don't need to worry about registering for VAT there.
However, I'm looking to expand to other countries. In the EU, I would have to register for VAT in each country from the very first sale. This is something I would rather stay away from for the time being.
I'm trying to understand how this applies in other countries like Canada, Australia, Mexico, Japan, Korea, etc. Each of these countries have their own VAT laws and regulations, and I am looking for those where I don't have to register for VAT from the first sale because of a threshold for non-resident businesses making domestic sales, like in the US. Does anyone have experience with this kind of situation, or knows of any resources that could help me understand international VAT better?
While I've been talking with tax advisors, it seems like most of them know the tax rules of specific countries really well, but not so much when it comes to international stuff. So, I'm hoping to get some advice or insights from people who might've dealt with a similar situation. Any advice or insights would be really appreciated!