Is dropshipping legal? Legal requirements and invoicing methods
Are you a freelancer and want to start dropshipping and want to know more about legal requirements?
Don't panic! You've come to the right place! Appvizer explains in this article all the legal requirements and how to invoice.
Is dropshipping legal?
With the arrival of dropshipping, many people thought that dropshipping was illegal because, seeing the turnover that dropshippers are able to get from their sales, they directly thought that the activity was illegal.Dropshipping is one of the most popular sales models in recent years, in 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 are obliged to guarantee top quality and undamaged goods.
What are the legal requirements of dropshipping?
From a fiscal point of view, dropshipping is considered to be part of e-commerce activities. To start dropshipping, there are several steps to follow: opening a VAT number, choosing the tax regime, registering with the chamber of commerce business register and the traders' management, and submitting the Scia in the municipality
Opening a VAT number for dropshipping and choosing the tax regime to apply
First of all, regardless of your turnover, you need to open a VAT number in order to be able to exercise your activity, as this is not an occasional activity, but a habitual one. In the VAT number, you need to indicate certain information such as: the place where you will carry out your activity and the ATECO activity code (47.91.10 - "retail trade of products via the Internet").
Once you have opened your VAT number, you will then have to choose your tax regime.As far as starting out is concerned, it is recommended in most cases to begin with a flat-rate regime, as taxation and contributions are low under this regime. However, it is necessary to assess all income and turnover because in some cases opting for the ordinary regime is much cheaper.
Registration with the chamber of commerce business register and with the trade association
Another step is to register with the commercial register at the chamber of commerce. An annual registration fee must be paid at this stage. Dropshipping is considered like any other commercial activity, so it is also necessary to register with the traders' association. Registration costs approximately EUR 4,000 per year for a maximum income of EUR 15,000.
Submitting the Scia to the municipality
The Scia allows you to officially declare that the activity has begun. This document is compulsory, as you cannot start your activity without it. This declaration must be submitted to the municipality and more precisely to the counter of productive activities, and the municipality must be the one in which you have decided to work. The declaration is done electronically, paying fees and stamps.
Invoicing in dropshipping
Invoicing in dropshipping 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 registered and then sent to the end customer.
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 then sends it to the customer.
If, 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, and it is also necessary to send a declaration every 3 months to the revenue agency in Italy, in which the VAT amounts for all countries are entered. The VAT must then be paid to the revenue agency, which then sends it to the respective country.
What to do from a legal point of view for a threshold above or below EUR 10,000?
However, if the threshold of the sale does not exceed EUR 10,000, the seller can apply Italian VAT. If the sale does not exceed the threshold. The company or supplier sends the order placed online to the end customer and applies Italian VAT. If the amount of the sale is above the threshold The VAT applied is that of the recipient's 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 is responsible for declaring that it has exported the goods.
- The producer or manufacturing company sends the goods to the end customer and issues an invoice for a non-taxable transaction according to Article 8.
- Both companies have to declare that the goods sold have left the Italian territory and this is done by querying the MRN on the Customs Agency website.
- The costs of the final import operation must be negotiated between the two parties as they are at the expense of one of the two parties depending on the previously established agreement.
- When importing into the non-European country, the operation is carried out taking into account the invoice issued by the e-commerce company.
Triangular VAT transactions
When dropshipping is carried out between two parties not resident in different states, the transaction can be referred to as a VAT triangular transaction.
A VAT triangular transaction is a transaction in which there are three traders involved at the same time, but which has two individual legal transfers.
The transaction is carried out outside the scope of VAT as there is not even a transfer of importation.
Article translated from Italian