DDP vs DAP for EU Dropshipping: Who Pays Import VAT, and Why It Matters

Reviewed by Michael Bauer, Cross-Border VAT Consultant Updated

Most dropshippers pick shipping terms based on price and delivery time. For sales into the EU, that choice has a second effect that is easy to miss: it decides who the importer is. And the importer largely determines where VAT is due, who pays it and whether you need an EU VAT registration.

This article explains the difference between DDP and DAP from a VAT perspective, and why getting it wrong is one of the most common sources of double VAT and back-assessments.

DDP and DAP in one minute

  • DDP (Delivered Duty Paid): the seller takes care of import clearance and pays import VAT and any duties. The customer receives the parcel without extra charges.
  • DAP (Delivered At Place): the seller delivers to the customer's address, but import clearance and import VAT are the customer's responsibility. The customer pays on delivery, often with a handling fee from the carrier.

You will still see the term DDU (Delivered Duty Unpaid). It was removed from the official Incoterms years ago; in practice it means roughly the same as DAP.

Why the importer matters for VAT

When goods are shipped to an EU customer from outside the EU, the general rule in Article 32 of the EU VAT Directive is that the supply takes place where transport begins, which is outside the EU. On its own, that would mean no EU VAT on the sale itself.

But the second paragraph of the same article adds an exception. If the supplier, or someone acting on the supplier's behalf, is the importer, the supply is treated as taking place in the member state of import. Germany, for example, has written this into its law in § 3(8) of the VAT Act (UStG).

In practical terms:

  • Ship DDP, with you as importer: your sale is taxed in the country of import. Unless IOSS covers it, that usually means a VAT registration and VAT returns in that country.
  • Ship DAP, with the customer as importer: your sale takes place outside the EU. The customer pays import VAT when the goods arrive, and you do not charge EU VAT at checkout.
  • Consignments up to €150 with IOSS: you charge the customer's local VAT at checkout and report it through IOSS. The import itself is VAT-exempt, so the customer pays nothing on delivery.

The mistake that causes double VAT

The most common problem we see is a mismatch between what the checkout says and what actually happens at the border:

  • The store charges VAT at checkout, "to be safe".
  • The seller does not use IOSS, and the parcel is shipped DAP.
  • At the border, the carrier collects import VAT from the customer again.

The customer has now paid VAT twice. The VAT collected at checkout was often never paid to any tax authority, or it was paid in the wrong country. The result is angry customers, chargebacks, and a VAT position that is hard to defend in an audit.

The fix is consistency. Your checkout, invoices, terms of sale, shipping labels and customs data must all reflect the same model.

Choosing between DDP and DAP

DDP makes sense when

  • Your average order value is above €150, and your customers expect a price with no extra charges.
  • You are prepared to register for VAT in your main import countries, or you sell through IOSS for low-value consignments.
  • Refused parcels would be very costly for you.

DAP makes sense when

  • You want to avoid EU VAT registrations for goods shipped directly from outside the EU.
  • You clearly communicate at checkout that import VAT and a handling fee may be due on delivery.
  • Your products and margins can absorb some refused deliveries.

Neither option is better in general. The right choice depends on your price points, markets and customer expectations, and it may differ per product line.

What to check in your own setup

  1. Who is named as importer in the customs data your carrier submits?
  2. Does your checkout charge VAT? If so, is that VAT reported through IOSS or a local VAT registration?
  3. Do your terms of sale say who pays import VAT and duties?
  4. Do your invoices match the model you chose?
  5. What does your carrier actually do at the border, and does that match your agreement with them?

Frequently asked questions

Is shipping DAP a way to avoid VAT?

No. VAT is still paid, by the customer, at import. DAP changes who pays VAT and where the sale is taxed. It does not remove VAT.

Can I switch from DDP to DAP?

Yes, but everything has to change at the same time: checkout, terms, invoices and carrier instructions. A partial switch creates exactly the mismatch described above.

Does the choice affect customs duties?

Yes. Under DDP you pay duties, while under DAP the customer does. The EU has agreed to end the duty exemption for parcels under €150, so check the current rules for your products.

How we can help

Our advisory service compares DDP and DAP for your specific situation. If you dropship from outside the EU and want to stop charging VAT at checkout in a way that holds up in an audit, see the VAT Fix. For low-value consignments with VAT collected at checkout, read IOSS registration without an EU company.

Want to know which model fits your store? Start the free VAT assessment.

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