Is dropshipping legal? Legal requirements and billing arrangements
Are you a Freelancer and want to start dropshipping and want to learn more about legal compliance?
Don't panic! You are just in the right place ! Appvizer explains in this article all the legal compliances and billing methods.
Is dropshipping legal?
With the arrival of dropshipping many people thought that the latter was illegal as, seeing the turnover that dropshippers manage to get from their sales, they directly think that the activity is illegal.Dropshipping is one of the most popular sales models in recent years.To make a long story short, dropshipping is a supply chain system used to reduce the cost of investment and start a new business.
In addition, although the goods are shipped directly from the supplier's warehouse, you as the seller will have an obligation to ensure that the goods are of excellent quality and undamaged.
What are the legal requirements of dropshipping?
From a tax point of view, dropshipping is considered to be part of e-commerce-related activities.To start dropshipping there are several steps to follow: opening a VAT number, choosing a tax regime, registering with the chamber of commerce's business registry and the traders' management, and submitting the Scia in the municipality
Opening a VAT number for dropshipping and choosing which tax regime to apply
First of all, regardless of the turnover you will make, it is necessary to open a VAT number in order to exercise your activity since the activity is not occasional, but habitual.In the VAT number you must indicate some information such as: the place where your activity will be exercised and the ATECO Activity code (47.91.10 -" retail trade of products via the Internet").
Once you open the VAT number you will subsequently have to choose your tax regime.Regarding the beginning it is recommended in most cases to start with a flat rate regime since in this regime the taxation and contributions are low. However, you have to evaluate all your income and turnover because in some cases opting for the ordinary regime is much more convenient.
Registration with the chamber of commerce business registry and the traders' association
Another step is to register with the Business Register present in the chamber of commerce. At this stage it is necessary to pay an annual registration fee. Dropshipping is considered as any other business activity for this it is also necessary to enroll in the traders' management, the enrollment costs about 4000 euros per year for a maximum income of 15000 euros regarding higher incomes in addition to paying the 4000 euros you have to pay additional contributions of a rate of 24%.
Submission of the Scia in the municipality
The Scia allows you to officially declare that the activity has begun. This document is mandatory, as without it you cannot start your business. This report must be submitted in the municipality and more precisely in the counter of productive activities, in addition, the municipality must be the one in which you have decided to work. The declaration is done electronically, paying fees and stamps.
The way of invoicing in dropshipping
In dropshipping, invoicing is done in the same way as in e-commerce. The dropshipper sends the invoice for the products sold directly to the e-commerce company. These invoices are recorded and then sent to the end customers.
If the customer and manufacturer are both in Italy, Italian VAT is applied to the goods sold. The company where the production takes place sends the invoice to the e-commerce company, which subsequently sends it to the customer.
In case, on the other hand, the manufacturer is in Italy while the consumer who made the purchase on the website is in a country within the EU. The selling company issues the invoice to the customers in the other EU country and applies the VAT of the recipient country, in addition, it is necessary to send to the Inland Revenue Agency in Italy every 3 months a declaration in which the amounts of VAT for all the countries taken into account are entered.Then it is necessary to pay the VAT to the Inland Revenue Agency, which then takes care of sending them to the respective countries.
What to do from a legal point of view for a threshold above or below 10,000 euros?
However, if the threshold of the sale does not exceed 10,000 euros, the seller can apply Italian VAT. In case the sale does not exceed the threshold. The company or supplier sends the order placed online to the end customer applying Italian VAT . In case the amount of the sale is above the threshold The VAT applied is that of the recipient country, The manufacturer sells the goods applying the VAT of the customer's country.
What to do from a legal point of view if the consumer is in a non-European country?
- The E-commerce company after selling and shipping the goods has the responsibility to declare that it has exported the goods.
- The manufacturer or producing company sends the goods to the end customer and issues the invoice for non-taxable transaction according to Article 8.
- Both enterprises must declare that the sold goods have left the Italian territory and this by making the query by MRN on the Customs Agency website.
- The expenses of the final import transaction must be contracted between the two parties as they are at the expense of one of the two parties depending on the previously established pact.
- When it comes to importing into the non-European country, the transaction is carried out by taking into consideration the invoice issued by the e-commerce company.
VAT triangular transactions
In the event that dropshipping is performed between two parties not resident in different states, the transaction can be traced back to VAT triangular transactions.
A VAT triangular transaction is a transaction in which there is the intervention of 3 economic operators at the same time, but which has two individual legal transfers.
The transaction is carried out outside of VAT as the import transfer is not even made.
Article translated from Italian