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:
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:
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.
