Home > Paid Traffic Sources > eCommerce

---

Country and taxations (11)

---

Hello, we are planning to start dropshipping business soon and as i see, you guys, you are too experienced with it.

Before we start actual store and other stuff, want to know which country is the best place to found company and what taxes should we pay on ur experience.

Can u share ur experience from which country do you work, is it hard to found company by foreigner there and what taxes are you paying?

I appreciate any suggestion.



Sent from my iPhone using STM Forums mobile app

---

This is not an easy question to answer. It may be easier if you are able to say more about

1) Where you are based
2) What citizenship you have
3) Where you plan to source goods
4) How you plan to fulfill goods
5) Where you will manage customer service
6) Where you plan to sell

---

Sure,

I am currently in Republic of Georgia. Same about citizenship. But we have company in Estonia as well.

We plan to sell in EU, mainly central europe or spain. If u have suggestions where it is easier to start, in terms of shipping, it will be very helpful.

Aliexpress or Alibaba

I will have customer service from Georgia i guess.


Sent from my iPhone using STM Forums mobile app

---

Gamarjoba - in that case you should be good to go with an Estonian company as an e-resident (I suppose you have e-residency). That's the best option if you want to be legally based in EU. You'll pay corporate taxes (if any) in Estonia and can deduct your payments such as VA' costs, etc. etc to lower taxes. If not, why not open in your own country? Will be easier in all terms (banking, accountancy, VA's,...)

In my experience it doesnt really matter where to open, as soon as you can make money all this legal questions will solve quickly as you get experience and see what suits you better (which country, company).

Cheers

---

Hello everyone! What about VAT? I think you should apply VAT to your products based on the VAT rate of each country you are selling.


Sent from my iPhone using STM Forums mobile app

---

@waterhouse

You only charge the VAT of the country you are selling to if you have a VAT number in that country, which is a necessity if:
- you hold stock in that country (triggers immediate need to register for VAT)
- if you sell more than the threshold for that country (ranges from 30K to 100k annually)

If you sell from a country outside the EU, like Georgia, you would not add VAT, your customer would pay that themselves, as well as the applicable import duty
If you sell from a country inside the EU, you would sell with the VAT rate of your own country added, unless one of the 2 conditions above are met AND you have the VAT number (so there's always a transition period, where a condition is met, but you can't charge the right VAT yet)

Hpe this helps.

---

It helps a lot! Thank you!


So, looking in to this case, if the money go to the Estonian company for all sales below the threshold for each country you have to add the Estonian VAT rate and then when you are above this threshold per country per financial year you have first to get a VAT number in that country and then apply country's VAT rate for your customers based on the user location. It seems to me quite difficult to be implemented in Shopify and adding VAT will increase final product costs.

Are you may aware of any solutions or do you suggest to incorporate outside EU if you want to sell in EU ?

---

@waterhouse, yes you are correct in what you write about the VAT issue.

You could use a different Shopify store for each country, just to make things easy VAT wise. Shopify can not handle VAT for multiple countries.

As for incorporation, I'd look at the big picture, so what do you want to achieve, can you sell the company, tax issues, VAT etc.
I would not base my decision on if shopify can handle this. That's too small of an issue to determine the foundation of your company on.

I suggest to pay for a good advisor in this case. In my experience, these are the moments that decide whether you'll make a decision you'll still enjoy a few years down the road - or really regret.

---

I think the important factor for you to consider would be the VAT implications on the goods. If you could position the business in a way where you could avoid adding VAT on the goods then this could really give you a competitive advantage. If you have more tax registered business related customers in EU then it may be worth considering incorporating a business in an EU state as these transactions would be VAT free.

On the other hand if that is not the case you may consider a UAE free zone company setup for this purpose. There is no corporation tax on company's profit so you can enjoy the benefits of having tax free profits. Simplify VAT rules and if you are selling goods outside the UAE and other GCC countries, the goods will be zero rated and you don't have to charge any local (UAE) VAT on the goods. However the customer may have to pay the applicable VAT rate of their country and the import duty.

As your business would be registered outside the EU so you don't have to worry about registering for VAT in any other countries regardless of whether your total sales to that country is above the VAT registration threshold of that country or not. The customer may have to pay the local VAT/import duty.

Above are just the preliminary thoughts and you must consider taking a proper tax advice before arriving at the final decision.

---

Personally, I wouldn't base my decision on avoiding VAT registration and such.

The simple reason being - either you as a company deal with it, or you let your customer deal with it.

In any important market, you don't want customers to get a bill with their order for the VAT amount.

We sell to the US and make it a point to pay all import duty and any other charges for the customer. In that way, they deal with us like they would with a US company and are never surprised with unexpected import duties.

I do agree with @digitas that it's a good idea to look at how profits are taxed. That could make a big impact on your bottom line.

Do take everything into account, like how your potential suppliers, local tax office and others would look at working with a foreign entity. And what your obligations are in the country you incorporate your company.

Like I mentioned before, this is where advice from a specialist pays dividends. Invest in good advice now, benefit for many years to come.

---

All advices are really helpful.

We just finally confirmed that from Georgia we cant work as Stripe is not supporting our country and we will definitely need some card payment processor. So now we have to decide in which country will we found
the company.

Can u suggest other countries except of Estonia, where it is easy to found company for non resident and taxations will be cheaper?

---

Home > Paid Traffic Sources > eCommerce