VAT-free dropshipping in the Netherlands: rules, benefits and important considerations

BTW-free dropshipping has become an attractive option in the eCommerce landscape, especially for businesses looking to reduce their tax obligations on international sales. However, understanding VAT rules for dropshipping within the Netherlands can be complex and frequently changing. This article explains how VAT-free dropshipping works, the specific VAT rules in the Netherlands, key considerations for cross-border sales, and the main advantages and challenges for businesses.

Understanding VAT in Dropshipping

Value-Added Tax (VAT) is a consumption tax applied to goods and services at various stages of production. For dropshippers—especially those operating internationally—VAT obligations can become complicated. This is especially relevant in cross-border dropshipping, where VAT compliance must be met across different jurisdictions.

How it works:

1. A customer places an order with a dropshipping store.
2. The dropshipper forwards the order to a supplier, often in another country.
3. The supplier ships the item directly to the customer.

When the supplier and customer are in different jurisdictions, the transaction may be VAT-free depending on local tax laws. VAT-free dropshipping can be a valuable model, but requires attention to supplier and customer locations to ensure compliance.

Dropshipping VAT Rules in the Netherlands

VAT treatment for dropshipping in the Netherlands depends on several factors, including the origin and destination of the goods. The VAT rules for dropshipping in the Netherlands include VAT registration thresholds, customs duties and specific schemes designed to simplify compliance for cross-border transactions.

VAT in the Netherlands

For eCommerce businesses selling to customers in the Netherlands, the following VAT rules apply:

• Dutch VAT Registration Threshold:
  The Kleineondernemersregeling (KOR) allows businesses with an annual turnover under €20,000 to be exempt from charging VAT.
  However, if dropshipping revenue exceeds this threshold, VAT registration is required, and VAT must be charged on eligible sales, with regular VAT returns.
• Cross-Border Sales Rules & the IOSS Scheme:
  For goods imported from non-EU countries, VAT is usually collected at the moment of import.
  The Import One Stop Shop (IOSS) scheme simplifies VAT compliance for goods valued up to €150 by allowing VAT to be collected at the point of sale.
  This reduces administrative burden at customs and ensures smoother cross-border dropshipping.

VAT compliance requirements differ depending on the dropshipper’s location. Non-Dutch dropshippers must register for VAT in the Netherlands if their sales exceed the KOR threshold. They may also use IOSS to streamline VAT collection for low-value imports.

Key Considerations for VAT-Free Dropshipping

To fully benefit from VAT-free dropshipping, businesses must carefully navigate their tax obligations, especially in the Netherlands.

• Supplier Location Matters:
  Partnering with VAT-exempt suppliers or suppliers located in the customer’s country can help avoid unnecessary import VAT.
  For dropshippers based in the Netherlands, sourcing suppliers within VAT-free zones or special tax regimes can simplify compliance.
  However, VAT generally applies to imports from non-EU countries unless covered by the IOSS scheme.
• Income Tax on Dropshipping Revenue:
  Dropshipping income is subject to income tax in the Netherlands. It is essential to track all income sources accurately for tax reporting and compliance.
• Customs Duties on Imports:
  Customs duties may apply depending on the value and type of imported goods.
  By using smaller packages or partnering with EU-based fulfillment centers, dropshippers can potentially reduce customs-related costs and speed up delivery.

Benefits of VAT-Free Dropshipping

VAT-free dropshipping offers multiple advantages that can accelerate business growth:

• Lower Product Costs & Higher Margins:
  By avoiding VAT on certain transactions through compliant use of VAT-free schemes, dropshippers can maintain higher profit margins.
• Simplified Compliance with Special Schemes:
  Using IOSS for eligible transactions simplifies VAT requirements, especially for low-value imports.
• Competitive Pricing:
  Removing VAT from eligible transactions enables dropshippers to offer more competitive pricing, attracting price-sensitive customers.
• Flexibility in Supplier Choices:
  Working with VAT-exempt suppliers broadens the selection of available products, improving the ability to meet market demand.

Challenges & Risks of VAT-Free Dropshipping

While VAT-free dropshipping offers benefits, businesses must also consider its potential downsides:

• Turnover Limits Under the KOR:
  The KOR scheme only applies to businesses with an annual turnover under €20,000.
  Once this threshold is exceeded, dropshippers must register for VAT, potentially increasing product prices and affecting competitiveness.
• Import Duties for Customers:
  Even if VAT is avoided on exports to non-EU countries, customers may still face import duties and local taxes, which can lead to unexpected costs and dissatisfaction.
• Complex VAT Regulations:
  Selling to customers in multiple countries introduces complex VAT requirements depending on the customer’s location and product origin.
  Dropshippers must maintain detailed records and seek professional tax advice to ensure compliance.

Best Practices for VAT Compliance in Dropshipping

Navigating VAT rules can be challenging, but these practices help dropshippers stay compliant:

• Register for VAT when required—know the KOR threshold and register on time.
• Maintain accurate records—track sales, expenses, and VAT payments in detail.
• Review supplier policies—some suppliers charge VAT in their pricing, simplifying compliance.

Closing Thoughts

VAT-free dropshipping offers a strong model for businesses aiming to expand internationally with minimal tax obligations. By understanding VAT rules for dropshipping in the Netherlands and applying best practices, dropshippers can optimize their operations—improving profitability and offering competitive pricing.

Monitoring VAT thresholds, using schemes like IOSS, and seeking professional tax advice are essential for sustainable growth and long-term compliance.

Need help with VAT compliance or tax planning for your dropshipping business? Visit our website for expert guidance and customized solutions. Our team is ready to help you optimize your tax strategy and maximize your profit.