“Dropshipping is now subject to effective taxation”, welcomed Wednesday March 20 Thomas Cazenave during a press conference at Bercy, in Paris. The Minister Delegate in charge of public accounts took stock of the government plan to combat fraud, one of the measures of which corrects a loophole in tax law allowing certain informed e-retailers to avoid value added tax (VAT) by completely legal.
What is “dropshipping”?
It is an online sales model without stock. Where a store orders goods from a supplier and then sells them to a customer, the dropshipper waits to make a sale before placing an order with its supplier, and has the products delivered directly to the customer. Requiring little investment, this model attracts many e-retailers, sometimes amateurs, who make significant margins by selling products on their site that are actually ordered from Chinese wholesalers like Aliexpress.
As Le Monde revealed in July 2023, certain “dropshippers” have succeeded in recent years in having an arrangement validated by the tax administration allowing them to circumvent the 20% VAT normally applicable on their sales in France – which gives them offered a substantial advantage over their competitors – while damaging public finances.
The trick was to place the payment of VAT on the final customer, the recipient of the goods purchased… which was in reality very rarely collected, due to a lack of ability to detect these flows of low-value goods at customs.
A flaw validated by the tax authorities
A European directive entry into force in 2021 was supposed to have brought order to the “jungle” of e-commerce, by imposing the payment of VAT on all online sellers. But this text focused on sales passing through intermediary platforms – such as Amazon, Alibaba or Facebook Marketplace –, forgetting independent “dropshippers”, whose case was not explicitly addressed in the law.
The accountant Amine Tber and the tax lawyer Marie-Anne Tchoudjem then stepped into the breach, advising several e-retailers wishing to exploit this loophole, in exchange for a few thousand euros. To limit the risk of litigation, these two e-commerce specialists had even obtained “rescripts” from the tax administration on behalf of their clients – documents interpreting the law enforceable in the event of an audit – confirming the validity of their reasoning.
The flaw had been identified by the government before the article in Worldsince a discreet measure aimed at filling it appeared in the plan to combat tax and social fraud announced by Gabriel Attal, at the time minister responsible for public accounts, in May 2023. The Bercy tax legislation department drafted an amendment to the tax code, which was voted on as part of the last finance law in December 2023, to make VAT avoidance illegal.
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