Question VAT DROPSHIPPING COMPANY

[Juninhoolr]

I do dropshipping, the products come from suppliers in China to various countries in and outside Europe. I have a company in the Free Zone of Madeira, Portugal and I am Portuguese. This company pays only 5% profit tax.

Now, with the change of VAT on sales to the EU, the solution to pay as little VAT as possible would be to open a business in a country outside the EU where there is no VAT on services.
In this way, the invoices to our customers would have a part corresponding to the service and another corresponding to the product, and we would only have to pay VAT on the value of the product.

My question is what would be the best country to start a business in my case?

Thanks!

 

[Sols]

You might not have to charge VAT if you incorporate and physically operate outside EU (it's dubious, consult a lawyer), but your customers will have to. So you will have unhappy customers that have to pay VAT to collect their items.

 

[JustAnotherNomad]

What would be the service? If the service is connected to the product, the service typically gets the same VAT treatment - as far as I know at least.

 

[Mr Gus]

VAT is always paid by the consumer, so it doesn't matter if you setup outside of the EU, there is just no way around it.

 

[Juninhoolr]

You might not have to charge VAT if you incorporate and physically operate outside EU (it's dubious, consult a lawyer), but your customers will have to. So you will have unhappy customers that have to pay VAT to collect their items.

What would be the service? If the service is connected to the product, the service typically gets the same VAT treatment - as far as I know at least.

VAT is always paid by the consumer, so it doesn't matter if you setup outside of the EU, there is just no way around it.

The idea would be to establish the company as a company that provides a sales intermediation service to our customers. And not a product sales company. In this way we would be just an intermediary who would charge a commission (service) to the customer.
As far as I know, the new VAT legislation with the IOSS system VAT only applies to the product and not to transport or services.
In this way, a customer would pay 10 EUR for the product + VAT (if the VAT is 23%, VAT = 1.23) and 20 EUR for the service. In other words: 10 + 1.23 + 20 = €31.20 is the total that the customer pay.

We receive the customer's VAT (1.23) and deliver it to the state, so when the products arrive at customs, they have the information that the VAT has been paid, and the customer receives the product at their home without any hassle.

But for that, the company would have to be based in a country where there is no VAT on the services

 

[JustAnotherNomad]

I don't think that's possible, especially when it's so obvious.

 

[explificit]

I do dropshipping, the products come from suppliers in China to various countries in and outside Europe. I have a company in the Free Zone of Madeira, Portugal and I am Portuguese. This company pays only 5% profit tax.

Now, with the change of VAT on sales to the EU, the solution to pay as little VAT as possible would be to open a business in a country outside the EU where there is no VAT on services.
In this way, the invoices to our customers would have a part corresponding to the service and another corresponding to the product, and we would only have to pay VAT on the value of the product.

My question is what would be the best country to start a business in my case?

Thanks!

would you be able to answer some questions one has about starting a drop shipping business