How does EU/UK VAT work nonresident dropshipping?

These questions sound hypothetical.

The product will be delivered to the customer by the
shipping company you chose, either USPS/mail, UPS,
FedEx, DHL, or whatever.

When you find a dropshipper to fulfill your orders, you
should address these VAT and paperwork questions to
them, so that they can explain their requirements to you.

If you're shipping to a UK retailer, that's your customer. If that business is registered for VAT, they will be charged VAT at the point of receipt and they will normally be able to reclaim that amount in their tax returns. The US dropshipper will usually only require the UK retailer's VAT registration number.

What the UK retailer subsequently does with the goods (eg resell to another UK customer) is not the concern of the original US dropshipper.

But you should definitely seek professional advice from a US-based international dropshipping expert before going ahead, especially if this is intended as an ongoing business model.

https://www.ups.com/us/en/shipping/i...E&gclsrc=aw.ds

https://www.usps.com/international/p...-shipments.htm

https://www.shipbob.com/shipping-fro...0in%20the%20EU.

The last one probably has the most information like a link to apply for a EORI number.

VAT is typically broken into 2 categories... "Common Items" and "Uncommon Items" you will have to figure out where your products fall into this, and that will dictate your VAT requirements.

There has obviously been a lot of rule changes in recent years ( Brexit ) the label and form have to be printed, and you willl need to supply a EORI Number to the drop shipper ( unless they have one? )

I personally do not drop ship - I direct ship... so I am not clear on the nuanced differences like if the drop shipper supplies the EORI and if they deal with all of that and charge you for it etc. At the very least these links will get you in the right direction so that you can have a more educated conversation with you drop shipper(s)

Hope that Helps!

Just an FYI - Wesly, please switch to Classic View below your user name in the black toolbar. Highlight your name and a down box will appear to make the switch.

Then use the quote feature to reply. Most people on this forum are not in the Modern View and will not know who you are responding to.

he/she is a UK based business that is asking for information on how to proceed using a USA based drop shipper - or for that matter a warehouse of goods based in the USA.

Yes they have to collect VAT, thats a given here, ( as long as the item is £135 or LESS )

Me not being in the UK... this part I find a bit confusing... In the UK buying product from the US... at time of import the US company would pay the 20% VAt.. and then in the UK you being the seller, shipping to the buyer would pay a 20% VAT... and then somewhere in there there is a 20% VAT return - correct? ( in your quarterly filings )

I am thinking that the added layer here of you being in the UK not having physical inventory, but collecting the money, and then dispatching the product for shipment from the US requires the collection of VAT 2X.

Again really not my area of experience or knowledge... ME in the States selling to the UK and EU yup... VAT for each country you sell - no VAT Return... but being in the EU, and UK and selling in either, you pay VAT, and product that is imported ( from the States )that you are selling VAT is collected, but quarterly it is returned ( the import portion - as a business expense )

So with the layer of the item being sold in the UK, but shipped from the States who's VAT # and what paper work is needed to keep that straight... I would contact the HMRC directly for that one ( https://www.gov.uk/government/organi.../vat-enquiries )

Hope that Helps!

I was under the impression the OP was talking about a USA-based business:

Also, the member is posting from the US.

the core question no matter where anyone is living is this.... the item is sold by a UK retailor to a UK buyer... the item is then shipped direct to the UK buyer from a USA location.

The scenario I am fully aware of and use daily would be a USA seller, shipping to a UK buyer, and I the seller would add the 20% VAT to the bill, print off the documentation that that VAT was paid and send the item obviously using my VAT number.

the complication gets added when the item is sold in the UK, to a UK customer, and then it is shipped... and let me explain why. The USA shipment is what would be considered wholesale. so lets say the item is $100 and then the 20% vat, so $120 is charged - ok easy enough. BUT in the UK the $100 wholesale item then sells for $200 and the required VAT is $40.

The $20 wholesale VAT is refundable on a quarterly basis to the UK reseller as a business expense.

The part I am assuming gets complicated is the VAT being paid by the USA shipper - and billed to the UK retailer, but the item is then sent to the buyer. The needed paperwork addresses and information will not match up, making a paperwork nightmare. Again i can only assume this is a complication.

As I understand VAT ( understand and not practice ) say I am in the UK and buy 10 items from a USA based seller. I pay VAT and then bring that into my store and sell it. If in a quater I sell 6 of the 10 I have sold, I can only get the refund for the 6 I have sold - make sense? The paperwork has to be spot on.

So again I am thinking that an item being sold and then shipped by a 3rd party complicates things vs wholesale to retail, and then retail to buyer.

The question then becomes who VAT do you use to keep this straight? and yes kids a UK/EU retailer can use their VAT number when importing from the States.

I can imagine the process is not that complicated, but not living in the UK or EU I obviously am not familiar with that end of it, given this exact scenario.

so reading through a little more... Wesley is looking for retailers to buy his items.... he the USA business owner will need a VAT number for the UK, and for each and every other country in the EU he is shipping to. He then collects the VAT and then pays the VAT to the appropriate Countries Tax office.

Keep in mind VAT is not the same 20% across Europe. in Sweden its 25% the UK its 20% Luxembourg is 17% Germany is 19% etc etc etc and you will need a country specific VAT for each country..

If you are selling whole sale to a retailor, you can ask to use theirs - if the total of goods is over £135

Hi,
Haven't been on this site for years - so sorry for the late reply.
Scanning the answers so far, they all seem to omit the very relevant issue of UK customs duty.
Years ago I ran a large business importing goods from Taiwan to sell through distribution from the UK
At that time VAT was 15% rising to 17.5% - but duty on the goods ranged from 5% to 25%
The goods were sent by 20 foot or 40 foot containers, paid on arrival using letters of credit.
A 20 foot container typically cost us £100k for the goods.
So one container needed £100k for the goods, £15k for VAT and say £10k for duty.
At that time the shippers typically charged 3% for handling the transactions (in addition to about £1k total shipping cost delivered to our warehouse)
To avoid the extra 3%, or £750 on total £25k VAT + duty bill, we needed to get a guarantee from our bank. To do so they insisted we kept a minimum of 2 months VAT and Duty costs in our account (in case 2 shipments came in in a one month and none the next) = £50k VAT and duty.
Just to make cashflow even worse, we had to pay VAT on goods we sold each month before we were paid for them. So if we sold them all for £125k we would need to pay and extra £18,750 VAT that we might not get back for a couple of months until resellers paid.
In summary, £100k of our goods needed an extra £25,750 up front + possible £18,750 in VAT = £44,500 on each £100k of goods before we got payments from customers.
To make matters worse, we were liable for defining the 'commodity codes' that define the duty for each and every product imported. The HMRC helpline tried their best but there are many thousands of them and it is often very difficult to work out which is the most appropriate, Any mistake found later and we could be charged for a different duty - 20% rather than 5%!
These duty costs are highly political and in the present climate liable to change at a moments notice - for example on batteries, steel, solar panels or cars.
In summary, my advice would be to check your cash flow before embarking on any import exercise. Couriers, such as DHL etc, typically bill you for the maximum duty they imagine - waiting for customers to query it, pushing liablility back to the importer.
A bit long, but details matter - so hope this helps.

PS after a couple of years HMRC accepted that were had a 'bonded warehouse' section of our warehouse (it wasn't separate in the physical sense) meaning we didn't have to pay the import VAT and duty until we moved it out = sold it. This was a big help. Not sure if businesses offer this as a service? It also meant we could avoid all VAT and duty charges if we re-exported the goods.