All things Shopify and commerce
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:
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)).
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.
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:
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.
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)?
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
Hi, were you able to solve your problem?
Hi Michael094!
Questions:
No, you cannot deduct the VAT CJDropshipping is charging you as that should be considered B2B sale with 0% VAT. They report using their sales price to your company, not your sales price to end-customer which is what IOSS should be for (purely B2C). They are, in effect, committing a tax fraud and they are dragging you with them.
Having your own IOSS number is the only way to avoid participating in a tax fraud.
You cannot deduct the VAT you have collected from sales to end-customers. But you can deduct the VAT from polish domestic sales VAT you have paid for. CJDropshipping should not invoice you with VAT.
OSS is needed only if you ship from Poland to other EU countries.
Feel free to reach out to us directly, we are always happy to help at EAS Project. you can find our cross-border VAT compliance app here: https://apps.shopify.com/eas-eu-compliance
2m ago Learn the essential skills to navigate the Shopify admin with confidence. T...
By Shopify Feb 12, 2025Learn how to expand your operations internationally with Shopify Academy’s learning path...
By Shopify Feb 4, 2025Hey Community, happy February! Looking back to January, we kicked off the year with 8....
By JasonH Feb 3, 2025