Re: VAT IOSS/OSS From China to EU & LOCAL VAT

VAT IOSS/OSS From China to EU & LOCAL VAT

Michael094
Visitor
2 0 0

Hi Guys!

I am the owner of a Polish online store specializing in dropshipping. I am reaching out for support regarding the VAT settlement related to importing products from China.

In the context of regulations concerning the supply of goods and services (VAT IOSS) and the development of my dropshipping-based business model, I have encountered certain challenges related to reducing VAT on my sales invoices, particularly regarding the VAT IOSS on invoices from the Chinese wholesaler. Tax information questions such actions.

Below, I present the sales model that I follow in my store:

  1. The customer makes a purchase on my website and transfers funds to my bank account (I issue an invoice to the customer, including Polish 23% VAT).
    Example: product price is PLN 246 gross (PLN 200 net + 46 PLN (23% PL VAT)).

  2. I then purchase products from point (1) from a Chinese wholesaler, CJDropshipping. Because I do not have my own IOSS number, I use CJ's IOSS number for product import and customs clearance. The cost of the product is, for example, PLN 123 (PLN 100 net + 23% PL VAT (PLN 23)). CJ issues me an invoice for the sale of the product.

  3. Every month, I need to settle the VAT from sales with the Polish tax office at a rate of 23%. Assuming that the only sale I made in the month is the one from point (1), it turns out that the VAT I should pay is PLN 46.

My questions are as follows:

  1. Considering that my company is an active VAT taxpayer in my country (Poland), can I reduce the VAT value to be paid from point (3) to the tax office by the IOSS VAT? Following this approach, I would then have to pay PLN 46 - PLN 23 = PLN 23 in VAT.

  2. By registering my company with IOSS and using my own number, am I then exempt from paying IOSS VAT, and the only VAT I have to pay is the one coming from sales (3)? 

  3. If I have my own IOSS number and I have to pay VAT IOSS can I reclaim that VAT during my monthly VAT settlement with tax office?

  4. Besides registering with IOSS, OSS would be beneficial for my business?

 

I am keen on understanding how I can effectively manage tax-related issues associated with dropshipping from China to minimize the risk of potential tax discrepancies.

 

I would be grateful for any tips and information that can help me correctly account for VAT in my business model.
In general, I am wondering if there is a logical way to avoid paying VAT twice, which occurs during the import and sale of products in my country.

Thank you in advance for your time and assistance in this matter.

Best Regards,

Michael

Replies 3 (3)

Rostislav
Shopify Partner
192 12 29

Hi Michael, 

Long and complicated discussion 🙂

 

1. "Dropshippers" like CJDropshipping (and dozens other) openly and bluntly break the law. Most of these solutions are not even dropshippers , they are just a bridging solution between your shop and Aliexpress like store in China. They do not even use their own IOSS number ( in most cases they are not registered for IOSS , and legally they even should not be registered for IOSS) , they use their supplier's (Aliexpress, JD etc.) IOSS number. 

Using their cervices with "their" IOSS number you also break the law since they underpay taxes you have no practical chance to fix it.    

 

If I follow then your business description:

 

Below, I present the sales model that I follow in my store:

  1. The customer makes a purchase on my website and transfers funds to my bank account (I issue an invoice to the customer, including Polish 23% VAT).
    Example: product price is PLN 246 gross (PLN 200 net + 46 PLN (23% PL VAT)).

- VAT has to be collected and paid on your IOSS number , in the sum of 46 PLN.

2.  I then purchase products from point (1) from a Chinese wholesaler, CJDropshipping. Because I do not have my own IOSS number, I use CJ's IOSS number for product import and customs clearance. The cost of the product is, for example, PLN 123 (PLN 100 net + 23% PL VAT (PLN 23)). CJ issues me an invoice for the sale of the product. 

 

- This is illegal see above. I doubt that they issue proper VAT invoice to you. The only way they can issue you the invoice with Polish VAT is if they supply to you from within Poland , not from Chaina. And they have to provide their Polish VAT number  (I doubt that they do it) . CjDropshipping  claims they can supply from EU , and technically you do not even know if they supply comes from EU (it shouldbe B2B with reverse charge or B2B Poland-Poland) ,  or from outside of EU (then it can be  IOSS)   

 

3.Every month, I need to settle the VAT from sales with the Polish tax office at a rate of 23%. Assuming that the only sale I made in the month is the one from point (1), it turns out that the VAT I should pay is PLN 46.

- If the item comes from outside EU (as claimed) you should pay 46 PLN within your IOSS report  and it should be on your IOSS number.

 

To your questions: 

 

  1. Considering that my company is an active VAT taxpayer in my country (Poland), can I reduce the VAT value to be paid from point (3) to the tax office by the IOSS VAT? Following this approach, I would then have to pay PLN 46 - PLN 23 = PLN 23 in VAT.
    - NO . If the item comes from abroad you have to collect and pay 46 PLZ to the Polish tax authorities on your IOSS number . It is the only way how you can use the IOSS scheme.  If the item comes from within EU , you still have to show 46 PLn as output VAT on your internal Polish  VAT report and you can claim 23 PLN only if you purchased the item in Poland with Polish VAT (that would be input VAT for you)                                                                                          -   In general one cannot claim IOSS /OSS VAT on your internal VAT report.  

2. By registering my company with IOSS and using my own number, am I then exempt from paying IOSS VAT, and the only VAT I have to pay is the one coming from sales (3)? 
Yes, But sooner or later you will run into trouble. CJDropshipping and other similar solutions cannot really use your IOSS number for import - they will be using other numbers (see the beginning of the message) . EU Customs actually collect data on imported goods on specific IOSS numbers and check it against the fiscal reports  . In your case you will be paying VAT  but there will be no imports on your number.  

3.If I have my own IOSS number and I have to pay VAT IOSS can I reclaim that VAT during my monthly VAT settlement with tax office?

- No , IOSS VAT is not to be used in your internal Polish VAT calculations. It is a special scheme. Moreover , on practical level it is equivalent to the internal output VAT - you do not claim output VAT , you pay output VAT to the tax office.   

 

4. Besides registering with IOSS, OSS would be beneficial for my business?

- Union OSS would be beneficial to you , but not with CJDropshipping. OSS scheme allows you to sell B2C to other EU countries without registering there . But it is important to know where the goods are shipped from  - it is not possible with CJDropshipping.  

 

If you want more precise information , write to me at info@easproject.com

and attach  CJDropshipping invoice.   

Sorry for a long reply , but we come across these "dropshipping" and POD solutions (most of them are not in the EU)  daily and are always amazed by the way how they treat the EU tax system.  

 

Yours, 

Rostislav 

www.easproject.com - the best EU and UK VAT compliance solution.
cemberku
Visitor
3 0 0

Hi Rostislav, 

 

Thank you for great explaination. I would like to make one point more clear regarding to your expertise. I built an online shop to sell in Sweden, by dropshipping from CJ. I am not worried about the ioss tax return or anything my only concern is "Will I have any trouble with the eu regulations or tax office if I import the products without having any IOSS number and using CJ IOSS number?". So I will just add CJ invoices to my accounting software and do the annual reports using them.

 

Best regards,

Cem

Rostislav
Shopify Partner
192 12 29

HI Cem,

Apart from the fact they should not use "their own" IOSS number  , the situation is somewhat OK from the fiscal point of view if you apply the option "Store Order Amount" is used  (see below) 

Rostislav_0-1713214613628.png

 

Option "CJ Order Amount" is straight forward illegal. 

 

Obviously I cannot know if they actually will settle proper VAT amount on the fiscal report even if you request that the "Store order amount" is used . What they do is that they exploit grey area in the current legislation with unknown further consequences  

 

 

www.easproject.com - the best EU and UK VAT compliance solution.