It is a scenario that many e-commerce entrepreneurs are familiar with: you sell products through your webshop that are shipped directly from China to your customer. You have no stock, no warehouse, and sometimes even no physical contact with the product. Everything goes straight from the supplier to the consumer. And then comes the question that is inevitable: what about VAT? Do you need to pay that in the Netherlands?

The term “dropshipping exemption” is not an official tax term, but refers to a situation in which you, as a Dutch entrepreneur, do not have to pay VAT on your sales to private customers in certain dropshipping arrangements. This sounds almost too good to be true, but it is possible, provided you meet a number of strict conditions. And that is often where things go wrong.

According to the Tax Authority lies the key in the determination of the place of delivery. In the dropshipping model where goods are shipped directly from a country outside the EU – often China – to the customer in the Netherlands, the delivery is considered to take place for tax purposes in the country where the transport begins. In this case, that is China. This means that the delivery is not subject to Dutch VAT. But that is only step one.

The import of goods into the Netherlands is indeed subject to VAT. Normally, as a business owner, you would have to pay this import VAT. However, with the dropshipping exemption, this is not done in your name. It is the postal or courier company that handles the import, and they pay the import VAT at customs. They then pass this amount on to the private customer, often via the supplier. As a Dutch entrepreneur, you are therefore not involved in the VAT payment – although the customer does feel these costs upon delivery.

That sounds simple, but there are strict rules. Firstly, the goods must be sent directly from a third country to the private customer, without you as the entrepreneur handling the import. Additionally, you must not make use of the import scheme (IOSS), as this would mean that the delivery is indeed taxed in the Netherlands and you would have to charge VAT to the customer. You also must not play a role in the transport that you indirectly designate as the importer. This last point is important, as even indirect involvement can lead to the tax authorities determining that you are responsible for the import VAT.

The knowledge group position KG:210:2022:5 from the Tax and Customs Administration provides clarity on this matter. It explains step by step that in a chain where a Chinese supplier delivers directly to the Dutch consumer, but the sale is conducted through a Dutch webshop, the transport is attributed to the delivery of the Dutch entrepreneur to the customer. Since the transport begins outside the EU, the delivery is considered taxable in China. And because the import is handled by the carrier, there is no Dutch VAT payment by the webshop.

For entrepreneurs, this sounds like an ideal arrangement, but there are also points to consider. Legally speaking, it is essential that your terms and conditions are crystal clear. They must state that the customer is responsible for any import duties and VAT upon receipt of the order. You should also repeat this notice during the ordering process and in the order confirmation. This way, you prevent customers from being surprised by additional costs and place the liability with the correct party.

Additionally, it is crucial that your purchase contracts with suppliers are clearly drafted. They must explicitly state that the goods are shipped directly from the third country to the customer, and that you play no role in the importation. If you are in any way involved in the import process – for example, by arranging or paying for the transport yourself – the tax authorities may conclude that you are indeed liable for VAT.

However, the dropshipping exemption is not a free pass for carefree entrepreneurship. The stance of the Tax Authorities applies to the Netherlands, but other EU countries may think differently. If you also supply consumers in Belgium, Germany, or France, you need to check on a country-by-country basis whether VAT registration is required. Sometimes it is wise to make use of the One-Stop Shop (OSS) system to reduce the administrative burden. This system allows you to pay VAT for all EU sales in one declaration in your own country.

Those who apply the rules correctly can save significantly on administrative burdens and avoid cash flow problems with the dropshipping exemption. No need to pre-finance VAT, no complex import declarations, and still operate fully compliant. However, those who ignore the conditions risk substantial additional assessments and fines.

Conclusion: the dropshipping exemption is a fiscal opportunity for Dutch e-commerce entrepreneurs, but only for those who strictly follow the rules. The delivery must start outside the EU, you must not have a role in the import, and the responsibility for import VAT and customs costs must lie with the customer. With clear communication, good contracts, and knowledge of the Tax Authority's position, you can take advantage of the benefits without sleepless nights over fiscal surprises.