dropshipping uk tax
Published on: January 28 2023 by pipiads
Table of Contents About dropshipping uk tax
- How to do Taxes in Dropshipping- Complete Guide for 2022
- Dropshipping in the UK | FULL Step By Step Guide for Beginners
- Dropshipping To The UK | Everything You Need To Know In 2020 (Shopify Dropshipping for Beginners)
- Everything You Need To Know About Shopify Dropshipping Taxes (2022)
- How to Pay Zero Taxes with an E-Commerce Business
- eCommerce In UK - A Guide For Non-UK People. VAT Explained.
How to do Taxes in Dropshipping- Complete Guide for 2022
all right. so in this video we're going to tok about how to do taxes with drop shipping. okay, it's a really big topic and it's really important to understand that. it's actually very important to understand this topic only after you start making sales. so if you're just starting out, if you have absolutely no idea about drop shipping, if you never have ran a store yet, don't think about that at all. okay, there's people who figured it out already. so it's possible to do it properly and you shouldn't worry about. all right, this is not going to work out for me and i have to know all the legal things before i even get started. if you haven't gotten started yet, then, number one, this video is not for you. and number two, don't worry about all the tik stuff. okay, at some point after you start making sales, you should actually start worrying about it, because it's actually pretty important to the property. so here we're going to tok about how to do it properly and what to what to focus on. all right, so the very first thing i have to mention is i am not a legal accountant, so i cannot officially advise you to do anything, so this video is going to be only based on my experience. don't take this video as a legal foundation. you should get a accountant or a person who knows what they're doing, all right. so the number one thing for taxes is: it's going to be pretty easy to to do all the tax statements and to do everything properly. if you have collected all the receipts, if you have done everything properly, if you know how much profit you made, how much loss you made, how many fees you paid, how many refunds you had, all those little things will be important and they're gonna screw everything up for you if you don't do it on a consistent basis. everything which goes into accounting is important to understand. that you should not do it in the very end and, with and like with everything, you should constantly do it as a process, okay, and at some point after you start making decent money, you can have a person who's going to calculate the things for you, and it's going to make things much easier for you, okay. so, number one: do everything properly. understand how much expenses you had, how much profits you made. all of that is going to be crucial to make it proper. and also, every single expense has to have a receipt, okay, and this is a thing which i've learned the hard way. in the beginning. i didn't collect any receipts, i didn't do anything. and what is really important to do and what's also pretty easy to do: every time you pay something, it doesn't matter if it's facebook, it doesn't matter if it's your supplier, it doesn't matter if it's a shopify app or shopify subscription- just have a folder where everything is going to be in one place and you do understand where the receipts are okay, and then, if that's already going to be ready, you're just going to give it to the accountant and everything is going to be done so much easier. the other thing is you need to have an invoice for every single person who bought from you. okay, so there's tons of softwares. in germany, we use sevdesk and it's basically a shopify app which makes invoices for every single customer which bought from you. okay, so it's going to be automatik. you don't have to do it manually and it's pretty simple to use, to set up. however, you do need to have it because if people from the government or the people who get your taxes, um, will want those, those invoices, they will need them for sure. all right, so you, officially, are obligated to have them at some point if somebody asks whenever, at a random time, that can actually happen like three years down the line, and they want receipts for 2019, okay, and then you're going to be in big trouble if you don't have that nice organized folder and yeah, that's basically important. also, two very specific things i want to tok about here is number one: get one supplier, and it's going to be so much easier if you only work with one supplier. i added this crucial mistake to keep working with aliexpress and with like a bunch of different suppliers for the first like three months of me doing well in dropshipping- okay, and that was a huge problem later on in accounting, because aliexpress is a pain in the ass for accounting and it's going to be a really, really annoying process. if you had like 20 000 orders, all right, so it's going to be a big, big problem. if you do not like real numbers on aliexpress. it's going to be annoying. so what you should have instead is one agent which is going to be an all-arounder. that person is going to have all the products you're selling and he's basically going to be the supplier which you go for always, okay, and later on you have maybe one more warehouse which you also pay, and that's it, but it's important to have this overview and not have 10 different suppliers, because it's going to be so annoying. and i had this huge issue and it took me like a month or so- and we were basically three people which were full-time working on this- to me- to work it out and do it properly, because it was just such a mess because i didn't care about anything. i didn't do anything properly and after that i felt it. so now i know it should actually be done in the in the first place and you shouldn't wait for it so long. however, keep in mind that accounting feels very productive, but in reality, it's not productive at all from a money making perspective. okay, so you're not going to make more money through accounting. however, it's just going to make your life easier in the long term and also it's going to help you not lose a lot of time at one point, because at that point you're not going to be able to make any money if you don't have any time investments at all for anything else than this accounting thing. okay, so keep this in mind: that accounting is important. you should do it one by one. however, do it only in your free time. after all, the really important things are done, okay. so all the money making activities should be always a priority, no matter what it is. and after that, after all of this is done, the next thing: in your free time, you should actually focus on the accounting. and if you do 30 minutes per week of accounting, you're probably going to be good, all right. it's like 30 minutes per week, one hour per week max, and it's gonna be off all right. however, if you don't do that for like four or five months, it's gonna be a really big problem, and i cannot emphasize this enough because it was such a huge issue for me personally and i had a really, really bad experience with that in a way like it's. it was just insane, okay. and also, if you hire freelancers, you need to understand that those freelancers- if you don't hire them through upwork or through a platform where it's super easy to get the, the receipts and the invoices, then it's going to be also a problem. if you just privately hire a person, they have no idea how to do anything and you don't really ask them for receipts and for invoices, they're not going to give them to you. and the same thing goes for the suppliers: if you don't ask the supplier for a receipt and an invoice. they're not gonna give it to you, okay. they're not gonna actively go to you and send you everything. you need to go to them and ask them: hey, every time you send this, please give me this as well. and if they don't, you have to constantly remind them, put it in folder, etc. and the last thing i want to mention here is facebook ads. so there are scenarios where you lose access to a facebook account and then all the receipts are gone. okay, so that can be a real issue. and if you have some kind of really strong block on that facebook account, you're not going to be able to access any receipts and any invoices and any anything basically at all. okay. so it's really important to keep that in mind and constantly download those receipts- obviously don't be paranoid about it- and do it every day. you basically have to have a report with all the things which facebook- uh, you paid facebook- and you have to have those receipts in a separate folder. it's super simple to g.
Dropshipping in the UK | FULL Step By Step Guide for Beginners
how to start a uk drop shipping business: a full, step-by-step guide for beginners. if you want to start your own drop shipping business and you've got your eye on the united kingdom, there's a good reason for that: it's one of the biggest markets in the world and doesn't have as much competition as other regions, like in the us. that's why, in this video, i will show you all of the ins and outs and how to start your own uk drop shipping business, whether you live in the uk or not. quick intro and let's go: hello everyone. i'm lyron from autods and in this video, you're gonna learn how to start your own dropshipping business in the uk, no matter where you live around the world and no matter what selling channel, what platform you want to sell. on one second before that, subscribe to our youtube channel if you haven't done so yet, if you always want to stay updated and learn about the biggest and hottest topics that are coming out in the world of dropshipping and, of course, like and share this video if you appreciate the value. now, having said that, let's go ahead and begin on how to start a uk drop shipping business. for all of you guys who are beginners here and you haven't heard much of the term drop shipping, yet this is a very easy business model with low risk that can give you high rewards, and the way it works is you have an online store where you sell products without holding any inventory, which means no initial investments and no big expenses right from the start. once a customer purchases a product from your store, you simply ship out that product to the customer's address directly from your supplier, meaning the product does not go through you, the seller, the drop shipper. you are just the middleman keeping the profit between the source price and the selling price. so what we're doing here basically is we are the middleman between the supplier, the manufacturer and the end customer. all that you need to do is find the right uk drop shipping suppliers with great products that ship from the uk and find the right selling channel to sell it on- and there's more than one right answer for this- and in this selling channel, you're going to list that suppliers, products or multiple suppliers, if you want to scale and earn even more, and you'll simply be importing products from your uk suppliers to your selling channel. and this is where the uk online shoppers will go to see what products you have for sale and purchase from your store. let's see how all of that works and everything else that comes along with the territory. let's start with some of the most frequently asked questions. is dropshipping even legal in the uk, especially if you don't even live in the uk? can you sell to them, and what are the rules and regulations that come along with that? so drop shipping is, and always has been and always will be, a legal business model. anyone can become a drop shipper, an e-commerce store owner. all you need is a computer, an internet connection and the right knowledge and tools, some of which i'm passing on to you in this video. and, for those of you who don't know, everything that i'm going over in this video is also on our blog, artikle, which i'll leave a link to right below. so drop shipping is definitely a legal business model. you just need to keep a few things in mind, like selling the right products, do not sell products that are copyrighted or that are trademarked, and you also want to abide by uk's business rules. go over the acs advice on preventing underage sales and read uk's competition and consumer laws for businesses, as well as their online and distance selling rules. hearing about all this may sound a little bit scary, but believe me, it's not. all the information here goes along with common sense and it's actually very practikal and easy to follow. just stay away from products that you cannot resell and also dangerous products like tobacco, firearms, weapons, ammunition, flammable material, flammable liquids and all things of those sorts. besides that, and copyrighted and trademark products, you shouldn't have any problems selling to the uk. but go over those rules and regulations just to be on the safe side, and always remember if you're going to dropship with our automation tool without ods, you'll always be protected when you're trying to add a product to your store that you are not allowed to resell, since autodesk has a large vero database with all kinds of products that you are not allowed to resell as a drop shipper. so you'll get hit with those warning signs and you can take it from there. so that's another layer of protection for you when starting off, and this way you'll be able to avoid making other people's mistakes. finally, the links to everything that you need to read about. i will also leave them right below this video and you also have them in the blog. artikle: is drop shipping profitable in the uk? well, i probably wouldn't be making this video if it wasn't, but to better show you how profitable dropshipping in the uk is. you can check out this chart from statista on the ecommerce sales in the uk from 2014 to 2019.. now, granted, today we're in 2022, which is three years past this chart, but just by looking at the increasing numbers which you can see here in billion in great britain pounds, so this for so here. for example, 2015, we almost reached 500 million great britain pounds in sales just from e-commerce in the uk, and you can see how the numbers increased every year. now drop shipping alone, and also the uk market, is growing exponentially every year. there is never a better time to join than now, and in one year from now you're going to say the same thing one year ago and so forth, moving forward, and this chart is just a small example of the potential of having an e-commerce business in the uk. so, yes, it is a very profitable business model and a very profitable market to target to when running your ecommerce business. what are my uk drop shipping tax obligations? now? this is a question that many, many people are asking before starting a uk drop shipping business, whether you live in the uk or not. so what are your tax obligations? how does this work and how do you get around this to doing it the right way, the legal way, and doing everything by the book? as a drop shipper in the uk, you have three tax obligations. the first one is income tax, the second is your vat and the third is customs duty. let's go over each of them one by one. your income tax is what you have to pay your local government, so wherever you live around the world, your local government probably wants you to pay an income tax for every income that you are making, including having a drop shipping or ecommerce business. what this means is you will have to pay your own government a certain percentage from your total profits, and this can easily be done if you have a local accountant. so what you need to do is speak with a local accountant and ask them: what are your income tax obligations and every other tax obligation that you have if you want to dropship from where you are to the uk market. your local accountant should help fill you in with all the information, including what your tax percentages are and everything else that comes along with the territory. so your income tax differs on where you live, and that is why you need to speak with a local accountant. the second is vat. when drop shipping to the uk market, we have to charge our customers a 20 fat fee from every purchase and then we'll have to pay that 20 to the uk government. now there's two ways of doing this. one: you can collect it from the buyer yourself on every cell, collect 20 vat and then pay that to the uk government. or you can have the customers pay that to the delivery company that's delivering the package to them. but of course the buyers would much rather have you pay the vat, and that will give them another reason to buy from your store. so make sure that you have a store policies section on your ecommerce store and in the policy section let the buyers know what happens with custom duties and taxes. who's goi?
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Dropshipping To The UK | Everything You Need To Know In 2020 (Shopify Dropshipping for Beginners)
so, when it comes to drop shipping in the UK, there's three really big questions I get asked quite frequently, to almost on a daily basis in fact. number one is customs duty, v80, income taxes- how do I pay them? do I need to pay them? how do I avoid them? who pays them? does the customer pay them? question number two is: do I need to set up a company? do I go sole trader? do I go limited? what are the advantages? which ones right for me? and then a third and final question I get asked all the time is the delivery time. so customers, are they really willing to wait that 20 to 40 days that Aliexpress quotes? so they're the three questions I'm gonna be answering in this video. hopefully, by the time you finished watching this, then you'll be, your mind will be put at ease and you'll be ready to get started in your drop shipping business, because, trust me, the best way to become good at running a business is by actually running a business, not by watching youtube videos. before we get started, though, one big favor to ask, and that is if you enjoyed this video. so if I answer any of these questions adequately for you, please do me the favor of hitting that like button. if you have any comments, questions, video suggestions, make sure you post them down below - I read every single comment- and then, third and finally, only 50% of people who watch these videos are actually subscribed. so if you haven't subscribed yet and please make sure you hit that subscribe button now and that means they don't. let's jump straight into question number one. so the first topic, or no address in this video, is customs duty and v80. so these are two potential charges, two potential costs that you will come across as your dropship and so outside of the EU, into the UK, you have customs duty and you have v80, two completely separate things. and these aren't to be confused with the v80. if you're a VAT registered business, where you pay 20% on all sales. they're not to be confused with corporation tax, which is what you pay on your profits if you're a business, and then not to be confused with income taxes as well. these are the taxes on the goods that you're bringing in and that's it. just two separate things. number one is customs duty. so this is charged on all gifts and goods if they're sent from outside the EU. so if you're drop shipping from China, then customs duty will come into play and they have to be above a certain value- anything under 135 pounds- there will be no charge and you won't have to worry about paying customs duty. the second potential cost you have to worry about is VA tea, which is currently cherished at 20% of the total value of the goods, and this is charged on goods sent from outside the EU- RIE, China- into the UK and you don't have to pay VA tea if the cost of those goods are under 15 pounds totals, as it says there, and the 15 pounds total equals no charge. if your goods are more than that, then you have to pay v80 on what the total value is. the next point you have to consider as well is these values, so the 15 pound total, the 135 pounds total. this includes the postage cost. so if you buy an item off Aliexpress that costs 14 pounds 99, as long as there's no delivery cost, you'll be absolutely fine. but if you have to pay e packet on top of that and that takes it over the 15 pounds total, then there will be a VA T charge to pay. the next important note to keep in mind is that this is on the total value of the goods that we pay for, so it's what we pay and Aliexpress, if you're selling, if you're buying an item for 10 pounds total and selling it for 50 pounds, it's only based on what we pay on Aliexpress. it's not based on what we sell it for. the next thing I want to kind of clarify as well is that the source of this information is as of March 2020, so if you're watching this 1 to 3 years later, it may have changed. the best thing to do to get the latest up-to-date information is to go to this link here. so this is from the official docker UK website. so as I'm recording this now, then in march 2020, then all of this is so far accurate. the next question to answer, then, is: should I set up a company? so should I go Limited? should I go sole trader? basically, there's three different ways you can do it. so when you start a business, you can set up as a sole trader, you can set up as a limited company or you can go as a partnership. now, it's really difficult to kind of give a blanket answer to this, because it depends on so many different factors. it depends on whether you have a job and how much money you earn from that. it depends on whether you own a house, do you have a family? ultimately, the best advice I can give you is to speak to a financial professional, ie an accountant, and they will ask you probably half a dozen different questions and, depending on what your answers are to those questions- the ones I've just mentioned- they will then advise you what the bet thing to do. however, most people I speak to then attend to be quite young students who aren't earning any money. so for most people, I'm guessing that they would want to register as a sole trader first, and you have to do this then. so the point in which you have to tell hate remercie that you're running a business and you're earning money is when you earn more than 1000 pounds in a tax year. now, just to take you through the kind of argument of sole trader versus limited company- because there's no doubt some people will ask me: what's the difference? why would you do one over the other? a bullet-pointed the three kind of main advantages- or at least they're the main advantages in my mind- in terms of a sole trader versus limited company, when it comes to actually running your business, ie accounting, then it's a lot cheaper to do so because as a sole trader, you can register for self-assessment and you can file your own accounts as a limited company. to my knowledge, you have to pay a registered accountant, a chartered accountant, to file your account on a yearly basis which, depending on who you go with, usually somewhere between kind of five hundred and a thousand pounds. point number two is that limited companies offer bet better tax relief when you hit a certain amount of profit. so when you're running as a sole trader, any profit you make would be classed as income tax and income tax typically is higher. when you get to a higher amounts, income tax is typically higher, can't tok right now? then corporation taxes. so, depending on how much you're earning, sometimes it's financially beneficial to register as a limited company. the third one, and the biggest advantage- from me at least, because I own multiple different properties- is that limited companies give you better protection. so the potential debts from your drop shipping business as separate from your personal finances. so, for example, them because their own multiple properties, if one of my drops you're in business because they're, because they're all registered as a limited company, if somebody was to sue me and I become liable to pay them, let's say three hundred grand and I don't have that money in the bank, then if it wasn't a limited company and I was a sole trader, I could be forced to sell those properties that I own in order to foot the bill. but when you register as a limited company, the company becomes a completely separate financial entity to you and yourself. so if you have a family, for example, and you live in a house and you have a more that house, the advantage of having a limited company is that if your drop shipping does become liable to pay some money, then your house that you and your family live in is completely safe. a night risk- and again, this information is from the dot-gov website and it's correct, to my knowledge, as of March 2020. the third and final question, and probably the most important or the biggest question or most popular question- sorry that you'll see going around in different Facebook groups- is a packet delivery times. do customers really weigh that twenty to forty days that you see Aliexpress quote in and write a couple of points now. so number one is:
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Everything You Need To Know About Shopify Dropshipping Taxes (2022)
[Music]. what's going on, guys? so there is so much confusion with drop shipping and taxes that most beginners, or even advanced drop shippers, have no idea how any of this works, and that's why i'm bringing on one of the most knowledgeable people in this field, who's been a tax expert for over 10 years, so i'm super excited to be sharing this information with you. um, give them a little introduction of who you are. hey guys, i'm chris rivera. i'm founder of a firm called the e-commerce accountant's name kind of says it all. uh, we're an accounting firm that specializes in online sellers. um, i throw around e-commerce very loosely, um, but mainly we deal with entrepreneurs that are in e-commerce. so i've been an accountant for 10 years, like you said, and i've been niche down in e-commerce for about four years- awesome, so yeah, guys. so i asked you on my instagram a few days ago on what questions you guys wanted to hear from him. so i have a bunch of really cool questions, but i also want to start off with him giving a little overview of what drop shipping taxes are, because i think people in general have a lot of confusion, whether you're a new entrepreneur or you don't know what's going down. chris is going to give you the lowdown on this. the way i like to break it down is into two separate categories. so, if you're an online seller, the risk is really centered around income taxes and sales taxes. so income taxes are name kind of says that all it's a tax based on your income or your profits- right, and we can dive into that in more detail if you'd like. and then sales taxes is something that is confusing to a lot of entrepreneurs, because it's actually not a tax that the entrepreneur tiknically pays. it's a tax that your customer pays. so if you're in the business of e-commerce, those are the two things in terms of taxes that you should really be focused on: income taxes and sales taxes, okay, cool. so i think one of the largest questions that i had- a lot of you guys asked this- is: when do you actually need to pay taxes as an e-commerce business owner? because most people are completely lost on this. a lot of entrepreneurs- not just e-commerce entrepreneurs, but entrepreneurs in general- think that april 15th is when you pay your taxes, which is definitely not true. april 15th is when you file your tax return, which tells the irs how much money you owe in taxes. basically, realistikally, how it's supposed to work is you're supposed to pay taxes quarterly or four times a year. uh, and the whole idea there is. you know, for those of you who have had a w-2 job before, when you get a paycheck, taxes are getting taken out of your paycheck and the irs is getting paid sporadically, bi-weekly, monthly, however often you're getting paid. but for you as an entrepreneur, if you're making 10 000 on shopify, let's say, taxes aren't getting withheld out of those payments, the irs is not getting paid. so the way that they counteract that is, they force you as an entrepreneur to pay taxes quarterly, which is, you know, every three months. you're supposed to stop, calculate your profits, estimated tax, pay it into the irs. and that's the main reason why i always tell entrepreneurs, you know, don't wait till tax season to hire a good accountant, wait till you're actually making substantial amounts of income, then hire someone to make sure that you mitigate your risk from a from a tax standpoint. absolutely, guys, you need to be listening to this because there is just so much confusion in this space and i think chris is really going to clear a lot up over here. so one thing that i think would be really beneficial to people watching this, because i know a lot of the viewers are primarily in the beginning stages. what piece of advice could you give to someone who's just getting into this field? they want to start making money but they're just not sure how this works like. what advice would you give them to make sure they're doing this properly? i'm a firm believer in when you're an entrepreneur, just focus on making money and the rest. as you become more and more successful, the rest will work itself out. uh, let's break this down into legally and tax wise. i'm not a lawyer by trade, but i know enough to kind of give some advice. i definitely recommend, in the beginning, getting an llc, because that at the very least, gives you uh, legal protection, but also it gives you the opportunity to structure to save money in taxes later on. so setting up an llc, i believe, is super, super important, and that goes for both american entrepreneurs but also non-american entrepreneurs as well. on the tax side of it, i think that in the beginning just focus on making money. you know it's taxes are very complex and professionals that specialize in giving tax advice are also very expensive. so in the beginning, just focus on making money and then, as soon as you have budget to pay a professional to help you mitigate or reduce risk for taxes? definitely do so. so, to break that down, you know 20 000 or more per year in sales. that's when i recommend that you hire an accountant to, at the very least, do your tax return. and then, once you're doing 30 000 or more per month in sales, that's when i recommend you hire someone to strategically help you tax plan. so what could people do at home right now to prepare, because obviously there's some actions that they could be doing themselves right. yeah, so i am a firm believer in having good data. so doing your own bookkeeping accounting in the beginning, it's safe. you know, i always tell entrepreneurs that as you're starting to scale up, don't undervalue the importance of bookkeeping, because bookkeeping gives you financial data which is super important to making decisions for your business, but also feeds directly into your tax return. i mean, i said before you know your income taxes are based on your income or your profits, right, and if your profits are wrong, you know your tax number is going to be wrong and that could be a very substantial amount, absolutely so my recommendation is, in the beginning, definitely focus on getting your accounting and bookkeeping in order, and that doesn't always necessarily mean outsourcing that work. but again, as you start to generate more and more substantial amounts of income, it becomes more of a high risk area. so, uh, in the beginning just focus on the data, the numbers, get book keeping, accounting in order and, uh, you know again, once you hit that 20 000 sales threshold in a year, hire a tax professional to help you, at the very least, report things correctly. absolutely okay, cool. so what company structure do you recommend for e-commerce businesses and at what stage? because you know, i know a lot of people are starting off with a sole proprietorship. like, what do you recommend for beginners doing this, or even more advanced people, and when should they consider the next approach? so, legally i, pretty much across the board, recommend having an llc for an e-commerce seller. now i see it all with you know people coming in the funnel saying, hey, another account told me a corporation or partnership or whatever for e-commerce. llc is the way to go, whether you're an american or a foreign entrepreneur, because the tax treatment of an llc is super flexible. you can literally submit a piece of paperwork into the irs saying, hey, i have an llc, but i want my tax treatment to be an s corp or a c4 or whatever. um, so llc is a really good idea, uh, in terms of your legal structure. now, the other thing i'd love to find- the person who, like, started this whole rumor or this trend in the space is. i get people all the time saying: you know, every single store i set up, i want to have a separate llc right, and while that does provide legal protection, the issue is that the space we're in- especially drop shippers or, i guess, e-commerce entrepreneurs in general- is it's transient in terms of the stories. you can have a store that does super well for six months. then it fizzles out. then you have a legal entity that's out there that you should resolve. you have to do tax return, you know, so it can get quite comp.
How to Pay Zero Taxes with an E-Commerce Business
let's cover a topic that not that many people cover here on youtube, and that is e-commerce taxes. as you can see from my shirt- automated e-commerce. i ran a company in e-commerce. we taught over 900 people how to build six-figure and seven-figure shopify and amazon stores, as well as myself having shopify stores that i ran to over 100 000 to multiple six figures, and from that i got into the tax saving business because i wanted to lower taxes for my e-commerce and for my e-commerce consulting business, which was automated e-commerce. so i know a thing or two about lowering e-commerce taxes. there are different scenarios that you need to consider. if you are just a drop shipper, you're selling products, not even touching them. somebody else is sending those products over from china to your customers. that's going to be way easier to lower taxes than if you have a warehouse. then, specifically, if you're selling to countries like the uk or european countries- if you're selling to european countries, things get a little bit trickier depending on where you're selling them, where your warehouses are based. so let's go through different scenarios that you need to do and what i recommend as an e-commerce business owner, as a previous business owner, what i recommend my clients from all over the world and what i recommend you to do for your ecommerce taxes. first up, what i recommend is that you move your company somewhere that has zero tax. don't move it to a place that has some taxes, like five percent, seven percent. when you're dealing with e-commerce, you really want to be as simplified as possible. there are a lot of moving parts. you have a warehouse, you have a partner, you have a supplier, you have people that pack, you have people that ship a lot of moving parts. you're not just selling a service. you're not just selling something online and just forgetting about it. you're actually delivering a product to a person that needs to get to them. they're gonna be refunds as well, so make it as simple as possible on the tax side. so, for example, you can set up a free zone company or a uae company in dubai and you have that and that's a zero tax company. you can get an e-commerce license very easy. takes about 15 days to set up. very simple when it comes to actually getting payments from your customers. let's say you're doing it through shopify or doing it through amazon. what you don't want to do is use stripe and paypal or other payment processors from the ue. typically, yes, you can get an account there. a lot of my clients have stripe connected to the uae but unfortunately some transactions don't go through, specifically from the us and canada. they just don't go through because of ua stripe or uae. paypal amounts get frozen a lot more often than they would from the us and it's just a hassle to deal with it. the transactions fees tend to be a lot higher and also you'll have a harder time actually getting the account. so what you want to do, you want to have that free zone company, that uae company, but you want to have a pass-through as well. so let's say, we start a us llc in the us. you can start in wyoming and arizona, whatever state you choose. just don't choose new york, california or hawaii. they tend to be very aggressive with taxes. choose pretty much anywhere else. you can choose florida or you can choose whichever one you prefer. ideally, you're not a us citizen or a us resident. if you are, then things get a little bit more complicated. we'll tok about that in a second. i've toked a lot about us taxes, the guilty tax, how to reduce taxes. but in this partikular scenario, in e-commerce, as a us citizen, you can pay zero tax. that's the beauty of it. so if you're making money through e-commerce, you can definitely pay zero percent tax while being an american, which is beautiful. now you have the uslc, you get stripe, you get paypal, you get easy paydirect. you get many different payment processors out there that there are for e-commerce, as well as a us bank account, which you can get fully online. i got a mercury bank account. it took me about 10 days and that was all fully online. with a uslc based in arizona. you have the uslc, you have a mercury bank account. you're receiving payments through stripe, through paypal, through shopify payments, whatever it is. you're receiving money into that us bank account. what you want to do, then, is transfer that out over to the uae bank account so it pays zero percent tax. if you're a non-us citizen, non-us resident, all the money that the us llc makes will also be zero tax, but it's just better to send it over to the uae, so it's truly zero tax. in case the us changes the law or in case they need to report something, you just don't have the money in the us bank account. you have it in the uae bank account and, essentially, you have it as a pass-through. that is how the money flows. that is how the money comes from the customer. it comes to a us llc, then they get, it gets passed to a uae company and it flows very easily. what you can also do if you're dealing with european payments or uk payments. you can also have a uk lp and with that uk lp you can get a bank account through that uklp and then send money over to the ue. the problem is that they're more restrictive laws when it comes to uk lps. you will need to pay vat at a certain point. you might need to pay some taxes after, let's say, 75 or 100 000 pounds that you're making. so i tend to recommend more the uslc run in order to lower your taxes that way. that is how the financials work on it. now let's actually go into the ground and, depending on how your business works, if you're just doing drop shipping, very easy to pay zero tax- you just have your supplier in china. the supplier in china sends over the products to your customers. typically, you won't pay any tax on those products in the places where you're selling them. mainly, if you're not based in the us or you don't have a us company in a partikular state, you're not gonna pay state taxes if we're dealing with european sales. for example, i have a client that deals with netherlands. he sells only to the netherlands. he has a warehouse in the netherlands. he's not a netherlands citizen, not a netherlands resident, but everything is done in the netherlands. you might need to pay vat value out of tax to the netherlands, depending on the amount of money that you make. so you do need to look at all these laws carefully. if you want to look at them carefully with me, you can book a call. with the first thing in the description: we can look at the partikular country that you're selling to, what their vat laws are and exactly what you need to look for. but in europe, specifically and in the uk, you might need to deal with some vat if you are selling to one partikular country a large amount of sales. now let's look at where is your warehouse, where are your employees? let's say that you have a warehouse of a hundred employees that belong to your company in the united states. then we start to have issues because that warehouse might be engaged in trade or business in the united states by irs definition. so, for example, you might have a uae company with a uslc. you're a non-us citizen, or you're a us citizen that lives abroad completely and you're lowering your taxes down to zero, but in reality, that warehouse is making you a lot of money. the products are coming from china over to that warehouse. people pack them, ship them, then they send them over to your customers in the us. the customers send the returns to that warehouse. you're really engaged in trader business in the united states, and this also happens with a lot of amazon sellers. so if you're selling on amazon and you're living somewhere else but you're doing everything through amazon, depending on how your relationship is with amazon, most times you won't be engaged in twitter business in the united states, but you do need to plan this out carefully. so what you might want to do is have two companies in the us: one company that receives money from stripe, from paypal, from shopify, from amazon, and then sen.
eCommerce In UK - A Guide For Non-UK People. VAT Explained.
hey, what is up? my name is rito and in this video i'm going to tok about how you can actually get started selling in the uk. and i know that for the past like couple of years, all the headlines have been mostly around like exiting the brexit and whatnot. but i want to break it down for you so that you understand it in more simpler terms, that if you want to sell in the uk, then what should be your plan of action ready? let's dive in. all right, so as your business reaches a certain scale in the us, it is recommended to not only like scale in terms of scaling your ad spend, but there are other ways to scale also. just to give you an example: let's say you're selling just on shopify. you want to scale to other platforms such as amazon, walmart, sears, and start selling on those platforms and start getting some more sales. let's say you have scaled on facebook and now you want to scale on other ad platforms like google, pinterest, etc. and then when you've scaled, let's say in the us, and you want to start scaling even further, you want to like target different geographies. and what are those geographies? places like canada, australia, uk. in this video i'm going to tok about uk, because that is something that i have been pursuing for the past few weeks, so i have gotten to learn a few things and i believe it's going to help you a little bit now. in the past, if you were drop shipping items to the uk, it was as simple as basically getting an order from the uk, giving that address, adding it on to aliexpress and then the chinese supplier would ship it directly to the uk customer. and many times what would happen- and this happens quite frequently in both europe as well as uk- that the package gets held by customs and the customer has to then pay customs fee on top of what they paid you. it leads to a very like uh deceptive kind of a pattern and something that doesn't go well with your brand if you want to keep selling regularly in a partikular country. so if you want to actually scale and sell, say, hundreds of thousands of dollars worth of stuff a year, or maybe a million or more per year in a partikular geography, for example uk, then you want to be positioned in a much better way rather than have like complaints coming all year long, like packages not coming, package impounded by customs and i'm having to pay customs fee on top of what i paid you. all of that hassle is not required. so how do you legitimize your operations in the uk? so there are two ways of looking at it. either find a uk based supplier who already has stok in the uk and then they ship directly to your customers, and that would be pure drop shipping. but the uk based supplier has to be based in the uk so that they can directly ship to your customers. the other option, the second option, is if you are selling stuff on your own. in that case you're going to have to give a uk vat number to your, say, chinese supplier who's going to ship the products to uk, and then a 3pl warehouse is going to host those products in the uk and ship to customers as and when orders come on your shopify store. now i've extensively explained the 3pl concept on this channel many times in the past. i'm not going to go through how a 3pl works, but it's basically third-party logistiks and they pack, store and ship items for you, so it's completely outsourced. now how does that help you? well, you don't have to be physically present in the uk. in fact, all the process that i'm following right now, i will never need to visit the uk and i will have a proper channel set up so that i can do sales. now, one thing to keep in mind is there's something called value added tax in not just uk but other european nations also. now the way that works is that, say your, your shipment is coming from china to uh, to the uk, so they're going to require two things from you. one is going to be an eori number, which is a eori number, and the other is a vat number, and eory and vat are generally linked. sometimes you can get away with one without the other. also, now, once your shipment is cleared via your vat, if there is any import duty to be applied, it's going to be applied on your vac number and then the shipment gets cleared and sent to your 3pl warehouse. now the 3pl warehouse is going to host it for you and the billing that they do so, for example, the charges that they do for you know, packing and shipping and all all this stuff. they are also going to charge you a vat, which is about 20, so they're going to charge you that on on top of the actual like amount. and when you get payments from your customers. so on your shopify store, you have to set a vat rate for uk also, which is again 20. so let's say, if somebody buys 100 pounds worth of items from you, then you have to charge them a 20 vat. and all of that can be like done automatikally in shopify and when they get charged the 20 pounds wet and then all through the quarters and year that you have accumulated all the vat from customers. you then can subtract that from the vat you have paid. so, for example, the vat that you have paid to, uh, your 3pl company, the vac that you have paid for imports and stuff, so you can subtract that and the net vat that comes out is what you have to pay to uk government. right, it is very similar to how a goods and service tax or a gst tax works in many other like countries around the world. and remember again, guys, it is not something you are paying from your pocket, it is a pass-through tax, right. so customers are paying the vat and you are passing on that tax on to the government and you just subtracting the tax that you have paid to your providers and your fulfillment agents and stuff. so when you combine all of that, then you have your network. that comes out and you can either file quarterly or annually. now, when you're registering for that, then you're going to choose whether you want to file quarterly or annually. for most people, i recommend the annual option is easy to get through, but you just have to estimate how much you have to file. but even in the annual filing model, you still have to, like, pay quarterly. you have to estimate what you're going to make in the entire year and pay quarterly, and then the actual filing is going to happen towards the end of the year. now, what are the services you can use? well, here's the path that i recommend for you guys. if you have, like, a supplier in the uk, well, they're going to charge vat from you, right, because they are shipping goods, so they're going to charge 20, and then you are also going to charge 20 from customers, is that? so what i recommend is get in touch with that supplier, because i bet they are also working with other people who are, you know, from the united states or other places. and the same thing applies to, say, if you're dealing with a 3pl company. the channel that i'm following through is that i went to my 3pl company, i signed a contract with them, they put me in touch with a service and that service is basically helping me set up a vac number inside the uk and because all these things are interconnected, it really helps in completing the entire process smoothly. now, because of kovi, delays are happening. it does take about six to eight weeks to get your vat number and once you have that vat number, you can actually then start selling in the uk. you can start importing stuff and start selling in uk. now, another thing to keep in mind, and this: this is where a lot of confusion came in in the first place. when i was doing my initial research, they told me that you need to have a uk company in order to sell in uk. so what they told me was especially the services that were- you know that- aid in creating companies. they're like: yeah, you need a uk company. of course they'll say that, but what? you don't need a uk company? like, i'm getting my vat registered on the basis of my us company with that agent or service provider. they are the ones who are going to file the uh, file the vat for me. they are the ones who are going to take my you know i'm going to give them a dump of all the transactions that happened in the uk in the partikular.