An Estonian OÜ is a common base for dropshipping because it is quick to register, can be run from anywhere and does not tax profit until you distribute it. None of that changes the VAT position, and VAT is where dropshipping goes wrong.
The one question that decides everything
Where are the goods when they are sold, and where do they go? Everything else follows from that answer.
- Goods shipped from outside the EU direct to an EU consumer: this is a distance sale of imported goods. If the consignment is worth €150 or less, IOSS applies. Above €150, normal import VAT and customs duty apply at the border.
- Goods already inside the EU when sold, moving to a consumer in another member state: this is an intra-EU distance sale and the €10,000 threshold plus the One Stop Shop apply.
- Goods inside Estonia sold to an Estonian consumer: ordinary domestic Estonian VAT at 24%.
Most dropshippers assume their supplier's shipping arrangement determines the tax. It does not. What matters is who is the supplier for VAT purposes, and that is usually you, unless a marketplace steps into the role.
IOSS and the €150 limit
The Import One Stop Shop covers goods imported into the EU in consignments with an intrinsic value of €150 or less. Registering lets you charge the customer's country VAT at checkout, hand the IOSS number to the carrier and have the parcel clear customs without VAT being collected again on delivery.
Without IOSS the customer is invoiced by the courier for import VAT plus a handling fee, often €10 to €20 on a small order. A meaningful share of those parcels are refused, and you pay the return leg. That is why IOSS is treated as a requirement in this model rather than an optimisation.
Intrinsic value means the value of the goods alone, excluding transport and insurance shown separately. Splitting a single order across two parcels to stay under €150 is not a strategy: consignments intended to be delivered together are assessed together.
When the marketplace is liable instead of you
If you sell through an electronic interface such as Amazon, eBay or Etsy, the platform is treated as the supplier for certain sales and accounts for the VAT itself. The two main cases are goods imported in consignments up to €150, and goods already in the EU sold by a seller not established in the EU.
In those cases you must not also declare the VAT. Doing so means paying twice, and reclaiming it is slow. Which of your sales fall into this depends on your own establishment and the location of the stock, so it has to be mapped from your actual sales reports.
Estonian corporate tax on dropshipping profit
Profit left in the company is not taxed. When you distribute it, the rate is 22/78 of the net dividend, an effective 22% of the gross. Personal purchases run through the company are treated as distributions and taxed the same way, which catches out founders who use the business card for the odd private order.
Where the money actually goes missing
- No IOSS registration, so customers pay VAT twice and refuse delivery.
- VAT charged at the Estonian rate on sales to consumers in other member states after the €10,000 threshold was crossed.
- Supplier invoices from outside the EU treated as if no VAT applies, when reverse charge and import VAT rules do apply.
- Advertising invoices from platforms outside Estonia not put through reverse charge, which understates both output and input VAT.
- Refunds never deducted from the country in which the original sale was reported.
What to put in place first
- Decide, in writing, whether you or the marketplace is the supplier for each sales channel.
- Register for IOSS before the first import if you ship consignments under €150.
- Track cross-border B2C sales against the €10,000 threshold from day one, cumulatively across all countries.
- Set up bookkeeping that can produce sales by destination country and VAT rate, net of refunds, every quarter.
Frequently asked questions
Do I need to register for VAT in Estonia to dropship?
Not automatically. Estonian VAT registration is triggered by €40,000 of taxable turnover, or earlier by certain cross-border purchases. IOSS registration is separate and depends on shipping imported consignments of €150 or less.
What is the €150 dropshipping rule?
Goods imported into the EU in a consignment worth €150 or less can be handled through IOSS, with VAT charged at checkout instead of at the border. Above €150, normal import VAT and any customs duty apply on arrival.
Does Amazon pay the VAT on my dropshipping sales?
For some sales, yes. Where the marketplace is treated as the deemed supplier it accounts for the VAT itself and you must not declare it again. Which sales those are depends on where you are established and where the goods start.
Tagsdropshipping tax EstoniaIOSSEU VATe-commerce
General information, not tax advice
This article reflects Estonian law as it stands on the date shown. Rules change and individual circumstances differ - confirm your own position with us before acting.