Switzerland, the island: Cross-border e-commerce business from Switzerland to the EU

Aktualisiert: 1. März

Having an e-commerce business in Switzerland, you might think that it will be straightforward to scale to other countries. Switzerland is in the middle of Europe so it should be easy to send your products to the EU. But is it?


I'll share with you some of the insights I have gained over the last couple of months while researching a way to expand my Swiss e-commerce business to the EU.


When I started my e-commerce brand, my planned market was DACH (Germany, Austria and Switzerland). In the beginning you don't know what you don't know. It was a long journey to understand what questions I have to consider if I want to sell my products not only in Switzerland but also in the EU or parts of it. I spent a lot of time researching and gathering information and would like to share my findings with you.


**Please note that I am not a lawyer or accountant. Use this information as a first input and as guidance only. Nothing I will say here can be hold against me.**

**I am not affiliated to or paid by any of the companies linked to.**



OPTION A: Sending goods from Switzerland and paying the correct VAT


Since July 1, 2021 new VAT e-commerce rules have been implemented. Before that date, if you sent small goods to an EU customer, they were exempt from VAT. As of mid 2021 e-commerce businesses have to pay the VAT of the customers country on all imported goods. That means that if you send a product to an end customer in Europe, you will have to pay the VAT in the country that you are sending the goods to. There are different solutions to comply with that rule.


1. Register with IOSS


You will have to register a VAT number in one EU country and register with the IOSS (Import One-Stop Shop). In order to register with IOSS, you need an intermediary that does it for you, who is also liable that you submit and pay VAT. Within the IOSS you can declare the VAT for all EU countries. All you need to do in your online shop is to charge the correct VAT upon check out and file a monthly or quarterly return. Your intermediary will assist you with this process. This solution is viable for goods with a value up to 150 €.


Advantages: you can sell to all EU countries from Switzerland

Disadvantages: running cost for intermediary even if you don't have sales; registering might take a long time (I was told 6-8 weeks when in reality it took 6 months); you need to find a solution on how to handle returns; goods above 150€ cannot be handled with that solution.


Recommendation: If you have a certain volume, this solution makes sense and helps you to expand within the EU market.


2. Use DDP shipping


For deliveries on the basis of the incoterms DDP (delivery duty paid), the e-commerce business must deliver the goods at their own cost and risk to a destination in the country of the end customer. The e-commerce seller must complete all the formalities involved and pay all import duties in addition to all costs. The Swiss Post sets up DDP solutions for businesses if your volume is high enough. Here you can ask for a consultation to find out more.


Advantages: you can sell to all EU countries from Switzerland without additional registration

Disadvantages: relatively expensive per package; you need to find a solution on how to handle returns; not really scalable


Recommendation: Personally, I am not sure if this solution still makes sense compared to IOSS.


3. Let customer pay VAT and taxes


This solution is definitely the easiest for you. Just send your package and let customers pay the VAT (and import tax). However while in Switzerland we are aware that sometimes import tax and even VAT is added, customers in the EU are not used to paying anything when receiving a package. Being it tax or VAT, any end customer will be surprised at best or upset that they still have to pay something when receiving the package.


Advantages: cheap solution for you, no setup necessary

Disadvantages: customers might be upset; you need to find a solution on how to handle returns


Recommendation: I would not recommend this solution. If you want to allow non-Swiss customers to buy from you, but don't have the volume required, this is an option. However in order to not upset customers, I highly recommend that you communicate very clearly (!) on the additional cost.


4. Sell on a marketplace


Have you thought about selling via amazon or another marketplace? You can find a summary with many useful tips on Swiss Global Enterprise or KPMG.


Advantages: depending on the marketplace and your product, this is a good solution; easy set up

Disadvantages: creating your own brand incl. style and marketing might be more difficult


Recommendation: I am not an expert on this topic and you might want to research a bit more on your own if you like that solution. For me personally the marketing aspect was too important.



OPTION B: Sending goods from an EU country


Depending on where your products are produced, you pay import tax in order to import them to Switzerland. If you now sell to an EU customer, there are export taxes to pay which means your goods are taxed twice. As an alternative to sending goods from Switzerland to your end customers in Europe, you can also have a storage in an EU country. This might also be a better solution if you have heavy or very expensive goods to reduce transport cost and / or taxes.


1. Open your own storage facility in an EU country


Assuming you are a Swiss e-commerce brand with a storage facility in Switzerland, this would mean to open another storage unit. If you decide to have your own storage facility in the EU, you will have to register a subsidiary in that country and someone will have to manage the logistics from there.


Advantages: returns from EU customers are easier

Disadvantages: expensive when it comes to registration, tax returns and employee cost; you'll have to manage two inventories


Recommendation: For a small start-up this most likely doesn't make sense because of the high cost and logistical effort.


2. Work with a fulfilment partner


Let someone else take care of storage, logistics, returns and inventory for you. There are many smaller and bigger companies out there that also work with start-ups. Most if not all of them will want an EAN (European Article Number) tag on your products. Just to name a few companies: Logsta, byrd, weship, warehousing1, or also Amazon FBA. You'll still have to register for VAT / IOSS.


Advantages: logistics as a whole is outsourced

Disadvantages: considering you keep your storage in Switzerland, you'll have to manage two inventories; running cost independently of how many sales you have


Recommendation: If you are ok with having two storages and inventories, this solution is good for you.


3. Close Border Fulfilment


The Swiss post offers a solution to store all your products in a fulfilment center in France just at the border with Switzerland and Germany where all customers can receive their goods from.


Advantages: only one storage facility; logistics as a whole is outsourced

Disadvantages: you'll have to register with OSS (One-Stop Shop) in France and need a fiscal representative for that


Recommendation: This solution is rather new but sounds like a great deal for e-commerce brands.



Other requirements


There are some other regulations to keep in mind when expanding your business. Keeping an eye on changes in any EU related regulation is key to make sure you stay compliant with your business.


1. REACH, RoHS, CE certification requirements


The REACH, RoHS, CE certification requirements apply to products sold in or shipped to EU countries. The purpose of those requirements is to address the production and use of chemical substances and their potential impact. Check if your product falls into that section.


2. Packaging laws


Some EU countries have implemented a packaging law to prevent or reduce the impact of packaging waste on the environment. As soon as you send your goods to an end customer in certain countries, the laws are applicable. You'll often have to register and pay an annual fee. You can find an overview of implications for e-commerce on ecosistant. The most important countries and packaging registers (not an exclusive list) are LUCID in Germany, France, Spain, BDO in Poland and others.


3. Regulations on labels, naming etc.


Every industry has different additional regulations and requirements. For the textile industry for example, you have to comply with the EU labelling requirements. Talking to someone in your industry is the best tip.



Conclusion


As you can see, there are many different options to make your e-commerce brand successful and it depends on many things - like the size of your e-commerce business, the financial means, the price and weight of your products, the quantity of orders, where your customers sit and many more.



Three tips I would give to anyone starting:

  1. Start small and expand from there. Trying to sell your products in many different countries might give you a bigger market size in theory but you first have to reach your customers. Especially in the beginning it means above all higher cost when it comes to logistics and marketing (don't underestimate the local specifics! More on that in another blog post.). You can always enter new markets later.

  2. Do some research to understand your options but don't wait for the perfect solution. This is a very general recommendation when it comes to start-up life. You will never find the perfect solution and just because a solution is perfect now, doesn't mean it will be later. Try to go with the 80-20 rule and improve later on. Otherwise you might never start.

  3. Talk to experts in your industry. You are not the first person to start an e-commerce business and even if you found a niche product, chances are high that someone before you encountered the same or similar problems. Don't be shy asking questions and getting as much information as you can.




Was that helpful? If something is unclear or you have further questions, feel free to post them in the comments.


And again: I am not an expert but someone that has gone through the journey myself (and it still continuously learning on the way) and wants to share my findings.


Do you want to find out more about my e-commerce business? Check it out here!

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