Dropshipping and VAT: what applies in Germany

Does your supplier ship straight to your customer? For VAT you remain your customer's supplier (§ 3 (1) UStG). Goods from Germany to a customer in Germany stay domestic. Goods from a third country generally bring import VAT; consignments up to €150 have a procedure of their own (§ 18k UStG).

Last updated: 27 October 2026

In short

Chain transaction: Transport is attributed to only one delivery in the chain (§ 3 (6a) UStG).
Input VAT: Deduct the VAT from your supplier's proper invoice (§ 15 (1) no. 1 UStG).
Small businesses: Exempt up to €25,000 (previous year) and €100,000 (current year), without input VAT deduction.

Who is the supplier in dropshipping?

The law defines a delivery as a service by which the business, or a third party on its order, enables the recipient to dispose of a good in its own name (§ 3 (1) UStG). In dropshipping your customer is the recipient and your supplier the third party acting on your order. If several businesses conclude supply contracts on the same good and it passes directly from the first business to the last customer, it is a chain transaction: transport is attributed to only one of the deliveries (§ 3 (6a) sentence 1 UStG). If the first business in the chain transports or ships the goods, it is attributed to its delivery (sentence 2). Your supplier then delivers to you with transport; your delivery to the customer follows it. Deliveries that follow the transport delivery are treated as made where the transport ends (§ 3 (7) sentence 2 no. 2 UStG); deliveries before it where it begins (no. 1).

For customers in Germany, your delivery is therefore made in Germany (§ 3 (7) UStG).

What applies with a supplier in Germany?

If your supplier is in Germany and the goods go to a customer in Germany, transport begins and ends domestically. Both deliveries are then domestic sales. VAT applies to deliveries that a business makes within Germany for consideration (§ 1 (1) no. 1 UStG). The rate is 19 percent, for certain goods 7 percent (§ 12 UStG).

Example under standard taxation at 19 percent: your customer pays €119.00 (€100.00 net plus €19.00 VAT). Your supplier charges you €59.50 (€50.00 net plus €9.50 VAT). You account for €19.00 output VAT and deduct €9.50 input VAT; you pay €9.50 to the tax office. You deduct input VAT only if you hold an invoice issued under §§ 14, 14a UStG (§ 15 (1) no. 1 UStG).

What applies with a supplier in another EU country?

If your supplier ships from one member state to consumers in another member state, an intra-Community distance sale may exist: the delivery of a good that is transported by the supplier or on its behalf to another member state. The place is then where the goods are when the transport ends (§ 3c (1) UStG). A de minimis threshold of €10,000 applies only to businesses with a seat or establishment in only one member state (§ 3c (4) UStG). If your supplier ships the goods, § 3 (6a) sentence 2 UStG attributes the transport to its delivery to you. If the transport ends in Germany, an intra-Community acquisition by you may arise (§ 1 (1) no. 5, § 1a (1) UStG), whose tax you can deduct as input VAT (§ 15 (1) no. 3 UStG). Whether your delivery to the customer is also an intra-Community distance sale, to which the €10,000 threshold and the OSS apply, or a delivery treated as made where the transport ends (§ 3 (7) sentence 2 no. 2 UStG), is a question of the individual case which this article does not answer for you. For sales to other EU countries: the EU OSS threshold of 10,000 euros and distance sales under § 3c UStG.

What applies with a supplier in a third country, for example China?

Imports of goods into Germany are subject to import VAT (§ 1 (1) no. 4 UStG). If goods come from a third country into Germany, the place of your delivery is treated as being in Germany where the supplier or its agent owes the import VAT (§ 3 (8) UStG). As a business you can deduct the import VAT that arose on goods imported for your business as input VAT (§ 15 (1) no. 2 UStG).

For consignments with an intrinsic value of up to €150 there is the special procedure under § 18k UStG (in practice called IOSS): the place of a distance sale from a third country is in the destination country if the tax is declared in that procedure (§ 3c (3) UStG). The import is then VAT-exempt if the supplier's individual identification number is given in the customs declaration (§ 5 (1) no. 7 UStG). You notify participation (§ 18k (1) UStG). Customs, customs value and other import charges are not covered by this article.

How does dropshipping through a marketplace work?

If you sell through a marketplace, the operator is liable under conditions for unpaid tax from your delivery (§ 25e UStG). In special cases it is itself treated as the supplier, namely for deliveries by sellers established outside the EU to consumers and for distance sales from a third country of up to €150 (§ 3 (3a) UStG). Details: Kaufland marketplace: VAT for sellers.

What applies to small business owners in dropshipping?

If you are a small business owner (total turnover of no more than €25,000 in the previous year and no more than €100,000 in the current year, § 19 (1) UStG), you do not show VAT and have no input VAT deduction (Finanzamt Hessen). The VAT on your supplier's invoices is then a cost for you. More: VAT return for small businesses in Germany.

Which mistakes happen often?

Treating your supplier as the seller to your customer. Towards your customer you are the supplier if your supplier delivers on your order.
Deducting input VAT without a proper invoice. The deduction requires an invoice issued under §§ 14, 14a UStG.
Forgetting the import. Goods from a third country are subject to import VAT; who owes it depends on the individual case.
Applying the €150 limit to the whole order. What counts is the intrinsic value per consignment (§ 18k (1) UStG).
Showing VAT as a small business owner. That is not permitted (Finanzamt Hessen).

How VAT GPT helps

If you have to report VAT, VAT GPT helps in three steps:

Upload: You upload your invoices and receipts. The AI reads amounts, countries and tax rates.
Check: VAT GPT prepares the advance VAT return, monthly or quarterly, and the OSS return for all EU countries. You check and confirm.
Send: With VAT GPT Pro via ELSTER to the tax office, and the OSS return directly to the BZSt.

Everything is in one place: advance VAT return, annual VAT return, OSS return, EÜR, trade tax and income tax returns. There is Free (basic features, free of charge), Go (30 days free with all Pro features) and Pro (€49 per month or €444 per year, each including VAT). Try for Free Now

Frequently asked questions

Do I pay VAT in dropshipping? Yes, unless you are a small business owner: you owe the tax on your sales and deduct the VAT on your supplier's invoices as input VAT (§ 15 (1) no. 1 UStG).

Where does my delivery take place? If your supplier delivers to a customer in Germany, your delivery after the transport delivery is treated as made where the transport ends (§ 3 (7) sentence 2 no. 2 UStG).

What changes with goods from China? Imports are subject to import VAT (§ 1 (1) no. 4 UStG); if the supplier or its agent owes it, the place of delivery is treated as being in Germany (§ 3 (8) UStG). Up to €150 per consignment there is the procedure under § 18k UStG.

Can I run dropshipping as a small business owner? The law ties the exemption in § 19 UStG to the turnover limits, not to the type of business. Note that you have no input VAT deduction (Finanzamt Hessen).

Do I need a VAT ID? For a marketplace operator's freedom from liability a valid VAT ID matters (§ 25e (2) UStG). How to store it: eBay VAT ID in Germany.