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Accounting for Dropshipping With Non-EU Suppliers: Practical VAT Guidance for Bulgarian Businesses
Dropshipping with suppliers outside the European Union is one of the most common business models used by Bulgarian companies. It offers flexibility and low initial investment, but it also introduces specific VAT and accounting obligations that many new sellers underestimate. In this article, written from the perspective of a professional accountant, we will walk through the practical rules you must follow in Bulgaria when your supplier is based outside the EU and your customers are located within the Union.
Understanding the Flow of a Non-EU Dropshipping Transaction
The core structure of this model is straightforward. A Bulgarian company sells a product to an EU consumer — for example a customer in Germany. The company receives the full payment and then places an order with a non-EU supplier, often located in China. The supplier ships the goods directly to the customer in Germany, without the goods physically passing through Bulgaria.
From an accounting perspective, this creates three key records: the sale to the EU customer, the purchase from the non-EU supplier, and the import of the goods into the EU. The last component — the import — is the most sensitive, because it determines who owes import VAT and duties.
Who Is the Importer of Record and Why It Matters
When goods enter the European Union, import VAT and customs duties become due. Someone must be listed as the “importer of record.” This person — the customer or your company — takes legal responsibility for complying with customs rules. The structure of your dropshipping business must clearly reflect which scenario applies. The table below summarises the essential differences.
| Customer as Importer of Record | Your Company as Importer of Record |
|---|---|
| Customer pays import VAT and duties when the shipment arrives. | Your company must handle and pay import VAT and duties. |
| Your company issues a standard sales invoice. | Additional customs documentation and procedures are required. |
| No extra VAT registrations are triggered. | Possible foreign VAT obligations depending on shipping volume. |
| Common and preferred structure for dropshipping. | Creates administrative complexity and higher compliance risks. |
Most Bulgarian dropshippers deliberately choose the first scenario, because it avoids customs responsibilities and keeps accounting obligations predictable. However, it is critical to verify how shipments are declared; accidental misclassification can lead to costly corrections.
VAT Rules for EU Sales and the OSS Threshold
When selling to private consumers within the EU, the VAT rules are based on the location of the customer — not the seller. EU legislation sets a threshold of 10 000 EUR for total annual cross-border B2C sales. Once your business exceeds this amount, you must register for the One-Stop Shop (OSS) scheme in Bulgaria.
Under OSS, you charge the VAT rate of the customer’s country. For a sale to Germany, you must apply German VAT. The collected VAT is then reported and paid through a quarterly OSS return submitted in Bulgaria. This system prevents the need for multiple VAT registrations across the EU and simplifies compliance, provided that your records are accurate.
Purchases from non-EU suppliers are not subject to EU VAT at the point of sale, but the import VAT rules apply depending on who the importer of record is. Even though your supplier is outside the EU, you must keep proper documentation for every purchase to substantiate your accounting records and your profit margins.
A Practical Example for Bulgarian Dropshippers
Imagine you sell a product to a German consumer. Because your EU turnover exceeds the 10 000 EUR threshold, you must apply German VAT. The VAT portion of the price must be recorded and later declared in your OSS return. You then pay your non-EU supplier for the goods and record this as a cost of goods sold. Your profit is the difference between the selling price and the purchase cost, adjusted for platform fees, processing charges and advertising expenses.
This example shows why clean bookkeeping is essential. You must be able to trace each transaction from customer order to supplier invoice, ensuring that VAT is correctly charged and the company’s margin is accurately reflected.
Compliance, Documentation and Practical Advice
Sound record-keeping is the foundation of compliant dropshipping operations. You should maintain:
- Clear documentation for every sale, including the customer’s country and VAT applied.
- Invoices or payment confirmations from each non-EU supplier.
- Evidence supporting your OSS threshold monitoring.
- Shipping and customs information to confirm who acted as importer of record.
Many dropshippers unintentionally become importers due to incorrect courier declarations. This can trigger unexpected VAT liabilities. Regularly review your logistics setup and confirm written agreements with suppliers or fulfilment partners to avoid such issues.
If your business plans to scale, consider consulting a professional accountant to ensure your VAT registrations, OSS filings and internal controls are aligned with EU requirements. Proper structure reduces risk and helps you maintain stable growth across different EU markets.
Ready to structure your dropshipping business correctly? Contact ASB Accounting Services Bulgaria today for expert VAT guidance, full compliance support, and professional accounting tailored to your international sales model. Our team will help you avoid costly mistakes and keep your business fully aligned with EU requirements.
This information is provided for general guidance only and does not constitute tax, accounting, or legal advice. Each situation requires individual review.