An Estonian company — a practical base for an online shop and a dropshipping business in the EU: fully remote management, 0% tax on reinvested profits and access to special VAT schemes (OSS and IOSS), which replace the need for VAT registration in each buyer’s country with a single declaration. This is a ready-to-use EU dropshipping solution – a legal entity operating within the EU legal framework, integrated with Stripe, PayPal, Shopify and marketplaces.
We put together a complete turnkey solution: we incorporate the company, register it for VAT and set up OSS/IOSS to suit your sales model, obtain an EORI number for importing goods, and manage your e-commerce accounts with correct processing of dispatch routes. You don’t receive a collection of disparate services, but a fully functional structure where the tax framework aligns with the actual flow of orders — and this is the key issue that dropshippers struggle with.
| Topic | Practical explanation |
|---|---|
| Legal form | OÜ – a private limited company, 100% foreign-owned |
| Income tax | 0% on reinvested profits; 22/78 on dividend distributions |
| Administration | Fully remote: registration, reporting and banking – all online |
| VAT registration | Mandatory for a turnover of €40,000 or more in Estonia; often voluntary at an earlier stage |
| OSS | Intra-EU B2C sales: single threshold of €10,000 per year, one quarterly return |
| IOSS | B2C imports from outside the EU, up to €150 per consignment: VAT charged at checkout, no delays at customs |
| Change from 1 July 2026 | Customs exemption for consignments ≤ €150 abolished; temporary duty of €3 per item introduced on low-value imports |
| Marketplaces | Amazon/Etsy/eBay collect VAT themselves in certain cases (deemed supplier) |
| EORI | Required for the import/export of goods |
If you have any questions, our managers are always on hand and ready to help! If you’re not sure which settings are best for your sales model, simply submit a request and our specialists will analyse your order flow free of charge.
It is precisely on turnover tax that dropshippers lose money and face additional charges. Let’s look at three scenarios that need to be distinguished:
A critical point where dropshippers often run into trouble: the regime is determined by the actual shipping route, not by the product description. If a supplier starts sending a best-selling item not from China but from a Polish warehouse, IOSS is no longer applicable to these orders; OSS or local VAT applies instead. Therefore, shipping routes must be checked monthly, not quarterly.
A recent change that many guides have not yet reflected: From 1 July 2026, the EU has abolished the duty-free allowance for consignments valued at ≤€150 and introduced a temporary flat-rate duty of €3 per item on low-value imports from outside the EU — in addition to import VAT. The measure remains in force until 1 July 2028, until the EU’s comprehensive customs reform comes into effect.
What this means for dropshipping from China and other non-EU countries: IOSS still handles VAT at checkout, but no longer guarantees a completely ‘duty-free’ price for the buyer — this duty must now be factored into cost price calculations and pricing. We take this into account when setting up your accounting and help you recalculate your unit economics in line with the new rules.
Setting up a shop through an Estonian company involves a number of services that we bundle into a single package. Here’s what you’ll need and where the links lead:
By ordering a package from a single provider, you receive a coordinated structure: registration, tax regimes and accounting are tailored to a single order flow, rather than pieced together from fragments provided by different contractors who lack an overview of the full picture of shipments.
Dropshipping seems simple — the customer places an order, the supplier ships the goods, and the seller never handles the goods. The complexity lies entirely in taxation: the VAT model breaks down the moment the actual delivery route changes, whilst the accounting system fails to keep up. Let’s examine the practicalities for an Estonian company.
A VAT number in Estonia is compulsory for taxable turnover of €40,000 or more per year, but a dropshipper often needs one earlier and for other reasons: to set up OSS/IOSS, work with B2B suppliers in the EU, and get onboarding with payment platforms. Furthermore, the special schemes themselves (OSS/IOSS) require registration separate from the standard VAT number. Which of these you specifically need depends on your business model — we’ll go through this in detail during a consultation. How to choose between OSS and IOSS (and often, you’ll need both)
A simple rule: IOSS applies when goods are shipped to the customer from outside the EU in consignments worth up to €150 (drop shipping from China); OSS — when the goods are already within the EU and are being sent to a buyer in another EU country (for example, you store bestsellers in a warehouse in Poland or the Netherlands). Many shops use both schemes simultaneously: small-scale imports under IOSS, and European fulfilment of bestsellers under OSS. The key requirement is that each order is processed under exactly one scheme and never under both at the same time.
In January, a supplier sends goods directly from China to customers in Spain and Italy – IOSS applies. In March, they start dispatching a bestseller from a Polish warehouse to speed up delivery. The product page and checkout process look the same, but the VAT regime for these orders has changed: from IOSS to OSS or local VAT. If the accounting system fails to pick this up, the declaration ends up with a mixed flow – and the tax authority spots the discrepancy. We therefore ask you to check the actual shipping route every month, before the end of the month.
A monthly reconciliation is sufficient for most small shops, but it must be based on real operational indicators:
For the accountant, the monthly export must contain at least the following: country of dispatch, order value, a flag indicating ‘VAT collected by the marketplace’, a note regarding returns/reshipments, and a comment on non-standard orders. Without this, the accountant can see the turnover but cannot see the VAT invoices behind it.
Estonian OÜs are accepted by Stripe, PayPal, Wise Business, Shopify Payments and most marketplaces — the final decision is made by each service based on the results of its own KYC/onboarding process. We prepare a business model description and onboarding documents, and for marketplaces, we help clarify where the platform acts as a ‘deemed supplier’ and is itself responsible for VAT, and where you are.
Given the abolition of the duty-free allowance for consignments ≤€150 and the temporary duty of €3 per item from 1 July 2026, the pricing of drop-shipped goods from outside the EU will need to be recalculated: a fixed duty is added to the cost price and import VAT. For low-cost goods (impulse purchases costing €5–15), the €3 duty can significantly affect your margin — we help you factor this into your unit economics and determine which option is more profitable: direct import via IOSS or a European warehouse using OSS.
Tell us about your e-commerce business (warehouse/dropshipping, payment processing, marketplaces, delivery regions) — within 24 hours we’ll draw up a working plan (company structure, VAT/OSS/IOSS, accounting) and a cost estimate based on your sales volume.
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