France – VAT Guidelines: Clarified VAT Rules on Dropshipping 

The Directorate General for Public Finances shared an official commentary/response on a question raised by a taxable person regarding the applicability of tax rules for distance sales of imported goods to customers in France or another Member State, when the merchant isn’t registered under the IOSS rules.  

This official commentary should serve as a guideline for traders using a dropshipping business model when supplying customers residing in France or another Member State.  In the commentary, the trader will find clear guidelines on tax reporting and accounting obligations for distance supplies and imports into the EU. 

The Guideline refers to both cases regarding the customs taxable value of consignments: when the parcel is valued at less than EUR 150, and when the parcel value exceeds this import threshold. 

Clarification and Impact 

Before moving into the practicalities of the explanation shared by the tax authority, let’s share a concise insight about the trade and submit questions. The trader in this case is a taxable person (a non-EU vendor) that uses a dropshipping model to sell to end customers in France and other EU Member States. 

The trader isn’t registered for IOSS, and it makes direct supplies to its customers. (There is no intermediary platform involved) 

The trader referred to the TA two principal questions: 

1. What are the rules and procedures for declaring and paying VAT applicable to distance sales of imported goods, to French and other EU-based customers? 
2. What are the import VAT rules applicable to these transactions? 

EU Imports Via France 

In cases where the entry points for goods from distant suppliers are in France, but the parcel is only in transit to another EU Member State, the place of supply remains the country of destination. 

For low-value imports(EU threshold), customs clearance is processed in the Member State where the end customer is based. Vendor isn’t liable for French VAT. 

For consignments where the invoice value is above EUR 150, the vendor is obliged to collect import VAT in France (when France is the EU’s point of entry) 

The seller can claim input tax credits for later B2C sales if the VAT is charged in the Member State of destination. 

EU Imports ending in France 

For distance sales of goods imported into France and supplied to French customers, different rules apply. The liability for import VAT could fall on the trader or on the end customer, depending on the following: 

The consumer is liable when the following conditions are cumulatively met:

• The item is located in France at the time of arrival of the shipment or transport destined for the purchaser
• Direct supply, no intermediary platform involved
• Seller isn’t registered for IOSS
• The tax base for the tax due on imports is equal to that which would be determined for distance selling if it were located in France.

In other cases, the supplier is liable for French VAT and must register for it. If the supplier isn’t an EU-established business, it must engage a tax representative. The non-EU vendors originating from countries with which France has a mutual assistance agreement in this matter don’t need the services of a local tax agent.