Understanding VAT & TAX Compliance for Dropast Orders

As global dropshipping regulations evolve, it's essential to stay compliant with tax rules — especially when shipping to the European Union (EU) and Canada. Since July 2021, the EU has updated its VAT (Value-Added Tax) framework, affecting all imported goods. Additionally, TAX regulations apply to Canadian-bound orders based on product value.

This guide outlines how Dropast helps you manage VAT and TAX compliance based on your shipping destination and business setup.

🇪🇺 VAT for Orders Shipped to the European Union

What Changed on 1 July 2021?

• The VAT exemption for goods valued under €22 was removed.
• All goods imported to the EU are now subject to VAT, regardless of their value.
• The Import One-Stop Shop (IOSS) was introduced to simplify VAT declaration and payment for distance sales of goods valued under €150.

What Is IOSS?

The Import One-Stop Shop (IOSS) is a system that:

• Enables sellers to collect, report, and remit VAT directly at the time of purchase
• Prevents buyers from facing surprise VAT or customs fees at delivery
• Applies to goods under €150, not subject to excise duties (e.g., alcohol, tobacco), shipped from outside the EU

💡 How Dropast Handles EU VAT

When shipping to an EU country, Dropast offers two flexible options:

Option 1: Use Your Own IOSS Number

• Dropast will not charge VAT
• Dropast will use your IOSS number for customs clearance
• You will be responsible for collecting and paying VAT to the appropriate EU tax authorities

Option 2: Use Dropast’s IOSS Number

• Dropast will charge VAT based on the product cost only (shipping fees excluded)
• Dropast will handle VAT payment and reporting on your behalf

📌 Dropast is not considered an electronic interface and does not act as the seller.

📋 Your Responsibilities When Using IOSS

If you use your own IOSS, ensure the following:

• Display the VAT amount at checkout
• Collect VAT from the buyer for all eligible shipments
• Keep each shipment under €150
• Submit a monthly VAT return and payment via the IOSS portal of the EU Member State where you're registered
• Maintain records of sales for 10 years
• Include your IOSS VAT ID during customs clearance

For official EU guidelines, visit the European Commission’s VAT Portal.

🇨🇦 TAX for Orders Shipped to Canada

Dropast charges TAX on orders to Canada under the following condition:

• If the product cost (excluding shipping) exceeds $15 CAD, a 31% TAX is applied
• Dropast is responsible for remitting the TAX

📝 Summary

✅ Choose the Best Setup for Your Business

Still unsure which option is right for your store? Contact our support team — we’ll help ensure your store stays compliant and competitive in global markets.