Dropshipping taxes for EU sellers

The short answer

Beginners use one word, tax, for four different things that arrive at four different times from four different directions. Separating them is most of the work:

The one beginners worry about, income tax, is the last one that will ever bite, because it applies to profit and most first stores do not have any. The ones that decide whether the store works at all are the middle two. This page is general information, not tax advice: rules differ by country and your own situation is a conversation with an accountant, not an article.

Nobody collects the VAT for you on your own store

This is the single most expensive misunderstanding on the list. Your Shopify admin has a taxes tab, so it feels like the platform is handling it. It is not. Marketplaces like Amazon, eBay and TikTok Shop are “deemed suppliers” in defined situations, which means the platform legally becomes the seller for VAT purposes, collects the tax and remits it, and those sales are then excluded from your own return. Shopify and WooCommerce are not marketplaces. They give you tax settings; the liability stays with you.

So a sale from your own store lands in one of three places, and only one of them is good:

• You are registered and collect at checkout. The customer pays a VAT-inclusive price, the parcel clears, nothing surprises anyone. For goods up to €150 arriving from outside the EU, the Import One-Stop Shop (IOSS) is the scheme that lets you do this with one registration.
• You are not registered and the courier collects at the door. Your customer gets a bill for the VAT plus a handling fee, from a company they never bought anything from. Some pay it. Many refuse the parcel and then dispute the charge, which costs you the sale, the shipping and a chargeback fee on top.
• You sold through a marketplace. The platform handles it, and this is genuinely simpler. It is also the one route where you do not own the customer.

The middle option is not a way of saving the VAT. It is a way of making your customer pay it twice as annoyingly.

Three thresholds that beginners merge into one

“When do I have to register for VAT?” has three separate answers, and they are about different things. Guides that quote one number are quoting one of these and not saying which.

• Your national exemption threshold. Below it you can trade in your own country without charging VAT at all. It is set nationally and the spread is enormous. The Tax Foundation’s European VAT registration threshold table, published 15 June 2026, puts Spain and Türkiye at no threshold at all (every business is in the VAT system), Cyprus lowest in the EU at €15,600, the Netherlands at €20,000, Germany at €25,000, Ireland and Italy at €85,000, France at €87,000 and Denmark at DKK 50,000. Which country you live in changes this answer by more than any decision you will make about your store.
• The €10,000 EU-wide cross-border threshold. This one is not about whether you charge VAT, it is about whose VAT you charge. Add up all your cross-border business-to-consumer sales to other EU countries in a calendar year. Below €10,000 combined you may charge your home rate. Above it you charge the customer’s country rate, which in practice means filing through the One-Stop Shop.
• The cross-border SME scheme, live since 1 January 2025. The newest of the three and the least covered. Per the European Commission’s own SME VAT rules site, if your turnover across all 27 member states stays under €100,000 in the current and previous calendar year, and you are also under each individual country’s threshold there, you can be VAT exempt in other member states too. You notify your home country, you are issued a VAT number ending in EX, and you file one quarterly report of your turnover across the 27, due within a month of the quarter ending.

There is a fourth case, and it is the harshest: if your business is not established in the EU, none of this applies to you. The SME scheme runs through your member state of establishment, so it is not available, and specialist VAT firms are consistent that non-established sellers face a nil threshold and are expected to register from the first sale. Those firms sell registration services, so read them with that in mind, but the direction is not disputed anywhere we could find. A US or UK seller shipping into the EU also needs an EU-established intermediary to use IOSS at all, which the same providers price at roughly €10 to €300 a month depending on volume, plus a setup fee.

The registration arithmetic nobody shows you

The standard advice is to register as soon as you can, so you can reclaim the VAT on your ad spend. That advice is right for exactly one kind of store, and it is not the profitable kind. Here is the whole thing in one line.

Your sticker price is VAT-inclusive, because EU consumer prices legally must be. Call it P, call the VAT rate v, and call your VAT-bearing costs C, stated net of VAT. If you are exempt you keep all of P and you pay C times (1 + v) for your costs, because the VAT on them is just money you spent. If you are registered you keep P divided by (1 + v) and you pay C, because you reclaim the rest. Subtract one from the other and everything collapses to:

Exemption is worth v times (P divided by (1 + v), minus C)

Which says something simple and slightly surprising: exemption wins whenever your net-of-VAT price is bigger than your reclaimable costs, and that is just another way of saying whenever the store is making money. A store at a €59.90 sticker in a 21% country, so €49.50 net of VAT:

The inversion is the useful part. Registration pays while you are losing money and stops paying the moment you stop, because reclaiming VAT on costs is worth most when costs are the biggest number in the business. Every beginner store is in row three. That is not an argument for registering, though, because rows one and two are where you are trying to get to, and a registration is easier to add than to unwind.

Three honest limits on that table. It assumes the sticker does not move when you register, which is the real case, because your competitor’s price does not change to accommodate your paperwork. It ignores the cost of compliance itself, which is real and is the actual reason small thresholds exist. And it expires: the exemption is capped, so the comparison is a snapshot of one turnover level, not a strategy. Whether you qualify at all is a national question. This is arithmetic, not advice.

The tax on your ads, including the new one

Meta’s EU entity bills advertisers business-to-business, so if you give it a valid VAT number the reverse charge applies: Meta charges you no VAT and you account for it yourself, netting to nothing if you can reclaim. Give it no VAT number and it adds your local VAT rate to the bill. At a 21% rate on €30 of ad cost per sale, that is €6.30 a sale of pure cost, which is the other half of the table above.

Then there is the one that landed six weeks before this article was written, and that most tax guides for dropshippers have not caught up with. From 1 July 2026 Meta passes digital services taxes to advertisers as a separate location fee, charged on the country where the ad is delivered rather than where your business sits. Two independent agency write-ups of the change, published separately and agreeing on every figure, put it at 5% in Austria, 3% in France, Italy and Spain, 5% in Türkiye and 2% in the UK. It is added on top of your campaign budget rather than taken out of it, it appears as its own line on the invoice and in Billing and Payments, and VAT is then calculated on ad spend plus fee.

A sourcing note, in the house style: Meta’s own help centre page on location fees would not load its body text for us this session, so the rates above are from those two secondary write-ups, one of which quotes Meta’s wording and cites the help centre URL. Treat them as reliable on direction and check your own Billing and Payments section for what you are actually being charged.

The reason it belongs in a tax article rather than an ads one: it is invisible to every number you optimise on. The fee does not appear in Ads Manager reporting, so the cost per purchase and the ROAS you are reading are both understated. A store targeting Austria at a €30 target ad cost per sale is really paying €31.50, and one targeting France, Italy or Spain is paying €30.90. If you set a breakeven ROAS from the ads manager and run right at it, you are quietly 2% to 5% under water in those six markets. The fix is one line of arithmetic, not a strategy: add the fee to your target ad cost per sale before you solve for your price. And the honest proportion, because we are not going to inflate this: 2% to 5% is far smaller than the CPM gaps between European countries, so this is a reconciliation problem, not a reason to re-plan your targeting.

The €3 duty is not VAT, and that matters

People file the duty and the VAT in the same mental folder and they behave completely differently. Per the European Commission’s own announcement of 29 June 2026, since 1 July 2026 a flat €3 customs duty applies to low-value parcels arriving from outside the EU on goods worth up to €150, charged per tariff classification rather than per parcel, with the seller or importer responsible for declaring and paying it, running until 1 July 2028. The Commission’s own example: five T-shirts is one €3 charge because they share a classification, while three T-shirts and a watch is €6.

The differences that matter to you. VAT is a pass-through you collect from the customer; the duty is a cost you absorb. VAT is proportional, so it scales with the product; the duty is flat, so it is brutal on a €12 product and a rounding error on a €90 one. And a VAT exemption does not exempt you from the duty, because they are different taxes under different rules. The full mechanics are in the €3 duty guide, and the one move that removes the line entirely is sourcing from EU stock, which also cuts delivery from weeks to days.

What compliance actually costs to run

Less than it sounds, once you are registered. Per the European Commission’s One-Stop Shop portal, the Union scheme return is quarterly and the import scheme return is monthly, both due by the end of the month following the period. You file one return with one country, which splits it and forwards the details to every country you sold into, and corrections are allowed for three years from the original due date. The cross-border SME scheme runs on its own quarterly report, also due a month after the quarter.

So the recurring work is four filings a year, or twelve if you are running IOSS, plus bookkeeping. The part that actually hurts beginners is not the filing, it is reconstructing the year afterwards. Keep every Meta invoice, supplier invoice and app receipt from the first week, because your income tax is charged on profit rather than revenue, and every one of those is a deduction you can only claim if you can still find it.

What changes in 2028, and why it is worth knowing now

Two things land at almost the same time, and they hit the same decision. The €3 duty is explicitly temporary and expires on 1 July 2028, after which normal customs tariffs apply by product type. Separately, the EU’s VAT in the Digital Age package brings single VAT registration and an expanded One-Stop Shop from 1 July 2028, with the deemed-supplier rules for platforms optional from that date and mandatory from 1 January 2030, and mandatory business-to-business e-invoicing and digital reporting from 1 July 2030. That timeline comes from professional-services and tax-software commentary on the adopted package rather than from the legal text, so read the dates as firm and the detail as subject to national implementation.

The practical read for a beginner is short: nothing on that list requires action today, and everything on it points the same way as the duty already does, which is that non-EU parcels get more administratively expensive over time and EU stock gets relatively easier.

What the tax rules do to product selection

This is where a tax article stops being paperwork. A VAT-inclusive sticker means the tax comes out of the price the customer already agreed to, so at a 21% rate roughly a sixth of your headline price was never yours. Add a flat €3 that does not scale, and the categories that only work at low prices are squeezed from both ends at once.

The SpotPeaks radar currently tracks 640 products with live ads across 80 niches, and that coverage is Facebook-weighted right now.

Three niches where that squeeze plays out very differently:

Kitchen gadgets is the classic €15 to €25 impulse band, and it is the worst case here: the VAT fraction and a flat €3 together take a large share of a small price, which is why the survivors in that category are usually sold as multi-piece sets rather than as one gadget. Skincare tools sits higher and absorbs both more comfortably. Massage guns sit in the €40 to €70 band where a €3 duty is genuinely a rounding error, which is the band the EU rules have been quietly pushing everyone toward since 2026 began. One honest caveat that shapes this whole section: our radar tracks how long ads have been running and on which platform, and it does not track selling prices, so we cannot give you category price bands and you should be sceptical of anyone who does. Open the listings and read the prices yourself.

As of August 2026 the widest niche on our radar carries 49 products with live ads at once, which is a field small enough to open one by one and check how competitors present their prices to EU buyers. As of the same month, the longest continuously running ad has been live past 1,000 days. Whoever is running it has paid VAT, card fees and now an ad tax on that product for nearly three years and kept going, which is the only public evidence anyone has that a category can carry the whole stack permanently. Browse what is running by niche on Facebook or across the whole winning-products radar.

What to do next

• Find your own country’s exemption threshold before anything else. It is the number that changes your answer most, and it is one search.
• Decide where your customers are. If they are mostly in your own country, the €10,000 cross-border threshold is not your problem yet.
• Run the exemption arithmetic above on your real numbers. If your ad cost per sale is bigger than your net-of-VAT price, you are in row three and you are not profitable yet, which is more useful to know than the tax answer.
• Add the location fee to your target ad cost per sale if you advertise into Austria, France, Italy, Spain, Türkiye or the UK, then check the result with the pricing calculator and the breakeven ROAS calculator.
• Price the duty properly with the EU landed cost calculator, which shows the EU-stock and non-EU paths side by side.
• Take the whole thing to an accountant once, early, for an hour. It is the cheapest hour in this business and nothing on this page replaces it.

The honest limit: none of this can guarantee you profit, and getting your tax setup right never made anyone money. What it does is remove a category of failure that has nothing to do with whether your product was good, which is refused parcels, surprise bills to customers, and a year of ad invoices you cannot deduct because you did not keep them. The levers that actually decide the outcome are still your price, your shipping speed and your creative, and they are covered in the Europe cornerstone and the starter guide.

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