Whether or not you need to pay Value Added Tax (VAT) on your dropshipped products depends on a few specific details about your business and your customers.
How VAT works for your orders
The application of VAT on your orders is determined by three main factors:
Your Location: Where you (the merchant) are registered.
Delivery Destination: Where the final product is being shipped.
Account Status: Whether your tax/VAT ID status is Verified or Denied in our system. A Verified status means you have provided a valid VAT ID and qualify for B2B tax exemptions, whereas a Denied status indicates a missing or invalid VAT ID, requiring us to charge you VAT upfront as a standard B2C consumer.
Important note: For all the scenarios listed below, the VAT rules apply equally regardless of the shipping method. You will see the exact same VAT outcome whether the item is shipped directly to you (Sent to merchant) or sent directly to your customer (Dropshipped to end client).
VAT application guide by merchant location
Below is a breakdown of when VAT is charged based on where your business is located and where the order is going.
Merchant based in the EU
Delivery to EU:
Account VAT ID VERIFIED: No VAT charged
Account VAT ID DENIED: VAT charged
Delivery Outside EU:
No VAT charged (Regardless of account status)
Merchant based in the UK
Delivery to UK:
VAT charged
Delivery to EU:
VAT charged
Delivery Outside EU:
No VAT charged
Merchant based outside the EU (excluding UK)
Delivery to EU:
VAT charged
Delivery to UK:
VAT charged
Delivery Outside EU:
No VAT charged
Merchant based in Latvia (LV)
Delivery to EU:
VAT charged
Delivery to UK:
VAT charged
Delivery Outside EU:
VAT charged
Special destination rule: deliveries to Latvia (LV)
Merchant anywhere, Delivery to LV:
VAT charged (Regardless of the merchant's location, all orders delivered to Latvia are subject to VAT).
Important: Supplier VAT vs. Shopify VAT
While our guide explains the VAT we charge you, you are solely responsible for configuring Shopify to collect the correct VAT from your end customers.
Configure settings: Shopify does not automate your taxes. You must manually add your VAT registrations under Settings > Taxes and duties.
Regional compliance: Check "Include tax in prices" for EU/UK customers to meet local consumer laws, and explore OSS/IOSS schemes for simplified EU cross-border reporting.
Disclaimer: We are a fulfillment partner, not tax advisors. Please consult a certified professional to ensure your store's tax settings are fully compliant.