The dropshipping model is a business model popular in e-commerce. It has its advantages and disadvantages. Learn everything you need to know about dropshipping, especially in the legal and tax context. We invite you to read more!
What is dropshipping?
Dropshipping model is a sales model in which the seller does not store goods in his warehouse. He orders them from the supplier, who sends them directly to the customer. This allows the seller to run a business without investing in inventory or storage. This is especially popular on platforms like Amazon, eBay, and AliExpress.
Is dropshipping model legal?
Yes, dropshipping is legal. However, it’s important to remember that every business is subject to the legal and tax regulations of the country in which it operates. It is crucial to run the business in accordance with the respective laws. This includes registering the business, paying taxes, and complying with consumer protection laws. Dropshipping also requires adherence to data protection regulations. Especially in the context of international sales.
| What information should be indicated on the website of the online store? | – Contact details: company name and address and Tax Identification Number – Terms and conditions of the online store – Cookies and privacy policy – Return and complaint policy |
Taxes and dropshipping model
One of the key aspects of dropshipping model is the proper handling of taxes. The main obligations of a dropshipping business are VAT and customs duties.
The VAT Act regulates tax obligations concerning dropshipping and sets the following provisions. The entities obliged to pay customs duties are the taxpayers liable for the import of goods. This applies even if the item has a preferential rate, is exempt from duty, or the settlement is suspended. It is important to remember that if a manufacturer outside the EU directly ships goods, the end customer in Poland is responsible for settling VAT and paying customs duties.
The buyer will be exempt from paying VAT and customs duties when he buys goods of “low value”.
| Charge | Limit | Legal basis |
| Vat | 22 EUR | Article 51(1) of the VAT Act |
| Customs duty | 150 EUR | Article 23(2) of Council Regulation (EC) No 1186/2009 establishing a Community system of customs exemptions |
Understanding international transaction tax rules is also crucial. Especially if the cooperation involves suppliers outside the European Union.
| Tax | Description | When is it charged? |
| VAT | Value added tax | Selling goods in the EU |
| Customs duty | Fee for importing goods from outside the EU | Importing goods from outside the EU |
Dropshipping model and consumer rights
When selling products to consumers, you need to comply with laws that protect buyers. In Poland, they result from the Consumer Rights Act. It provides that, no later than at the time when the consumer expresses his will to be bound by a distance or off-premises contract, the entrepreneur must inform the consumer e.g. about the conclusion of the contract on behalf of another entrepreneur.
The Act also requires to inclusion of certain information already in the description of an auction or product offered in an online store.
| What information should be included in the auction/product description? | – A statement indicating the role of the intermediary acting on behalf of another entrepreneur – Identification data of both the intermediary and the seller. For example company, address, VAT ID, registration numbers, etc. – Information that clients are the importers liable for potential customs duties and VAT. – Details on the possibility of filing complaints and withdrawing from the sales contract – Cost of intermediation services |
Failure to include this information is a violation of the law. It may result in a penalty for “superficial dropshipping”. Consumer rights violations are investigated by the Office of Competition and Consumer Protection. If infringements are found, it may impose fines and issue preventive decisions. For example, an order to cease the practice.
Advantages and disadvantages of dropshipping model
Dropshipping model offers many benefits, such as a low entry barrier and no need for a warehouse. Yet, it also comes with risks such as low margins and challenges in managing complaints. To run a successful dropshipping business, it’s crucial to understand both advantages and risks.
| Advantages | Disadvantages |
| Low entry threshold | Low margin |
| No need to store goods | Difficulties in quality control |
| Ability to do business from anywhere | Longer delivery times |
Dropshipping model – summary
Dropshipping is an attractive business model for many entrepreneurs. Especially for those who are just starting their e-commerce journey. However, it is crucial to thoroughly understand the related legal and tax aspects. Compliance with regulations and keeping track of legal changes are key to success in dropshipping. You should stay up to date with both domestic and international regulations.
Do you want to start your own dropshipping business? Don’t wait! Start with considering legal and tax matters to avoid future problems. Consult a lawyer or tax advisor to ensure your business complies with current regulations.
If you have questions or need support, contact us today. Our experts will help you start your dropshipping business safely!
FAQ – questions and answers
Is dropshipping legal?
Yes, dropshipping is legal. Yet, remember that you must comply with the laws and tax obligations in the country where you operate.
What taxes do I need to pay when running a dropshipping business?
Depending on the country, it can be VAT, CIT and customs duty on imported goods.
Can I do dropshipping in Europe?
Yes, dropshipping in Europe is possible. Yet, you must comply with local laws related to data protection and consumer rights.
Is dropshipping profitable?
Dropshipping can be profitable. Yet, it is associated with low margins and high competition.
What are the best platforms for dropshipping?
Popular platforms include Amazon, eBay, and AliExpress.
Do I need to register to run a dropshipping business?
Yes, operating a dropshipping business requires registering a business.
What are the risks associated with dropshipping?
The main risks are low margins, problems with suppliers and difficulties in managing complaints.
Is dropshipping from AliExpress legal?
Yes, dropshipping from AliExpress is legal. However, you must comply with import regulations as well as consumer rights.
What are the most important legal aspects of dropshipping?
The key aspects are business registration, compliance with consumer law and proper tax settlement.
Do I have to pay customs duty on dropshipping products?
Yes. If products are imported from outside the European Union, customs duties may apply.