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New VAT ecommerce rules have come into force on the 1st of July. Now, all imported goods – also the ones worth less than 22 euros – are taxed with VAT. For dropshipping ecommerce companies things could get more costly, but not for retailers using dropshipping platforms that work with stock based in Europe like BigBuy. Ecommerce News Europe spoke with CEO Salvador Esteve.
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Since the first of July, the VAT exception has been removed on products imported for less than 22 euros. This could become a costly change for both consumers and online retailers. But at the same time, this could be an opportunity for other online retailers. The difference could be where these ecommerce companies get their products or stock from.
The new VAT rules could become a costly change for both consumers and online retailers.
Online retailers that run their business based on dropshipping have probably been following the news about the new VAT rules for quite some time now. Many companies that sell through dropshipping -a business model where the supplier sends the product directly to the final consumer, allowing the seller to have a business without the need to invest in stock- get their products from Chinese suppliers.
On the other hand, there are other companies that rather prefer to work with suppliers like BigBuy with stock located in Europe. Reasons cited to do so are they provide a hassle-free operation, avoiding troubles linked to Chinese imports on top of customs delays and paperwork. It’s also said they offer better customer service, shorter delivery times, and certified products fulfilling all European regulations.
New European VAT regulation
But it’s these cases that the new European regulations on VAT, launched on July 1, 2021, directly affect. Because the objective of this new regulation is to regulate imports into Europe of products that cost less than 22 euros.
Continuing with Chinese dropshipping suppliers will not be so cheap anymore.
Salvador Esteve, CEO and founder of dropshipping platform BigBuy, thinks that for online retailers to continue to work with Chinese dropshipping suppliers will not be so cheap anymore. “Before, dropshipping with a Chinese supplier with products sent from their country was very cheap, both due to the low price of the product and the absence of taxes, since products with a value of less than 22 euros were exempt from VAT”, he says.
Now all imported goods are subject to VAT
“But from the first of this month, all goods imported into the European Union, even if they don’t exceed 150 euros, will be subject to VAT or the equivalent tax in each country. So, continuing to work with Chinese dropshipping suppliers will not be so cheap anymore, as it will increase the price of these products for consumers.”
Also, since the first of July, online sellers are responsible for collecting, declaring and paying VAT to the corresponding authorities in their country. You can read more about the VAT rules for European ecommerce on this page.
BigBuy’s strategic position facing the new regulations
But the new rules will not affect all dropshipping suppliers in the same way. Esteve is optimistic that this change strengthens BigBuy’s position now the competitive advantage that the VAT exemption provided to dropshipping in China disappears. “This new regulation strengthens the position of BigBuy because we work with stock located in Europe.”
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