E-commerce taxes

E-commerce taxes
Marek Cieślak

Marek Cieślak

CEO CGO Finance

E-commerce taxes are a major topic of interest among entrepreneurs who do business online. It’s not easy to keep up with changing regulations, and it’s worth keeping up to date to properly understand tax obligations in this industry. Therefore, below we discuss the most important issues related to e-commerce taxes, such as reporting obligations, taxation of international sales and VAT calculation rules and more.

E-commerce taxes – e-commerce package

The implementation of the e-commerce package in 2021 resulted in several changes to legal provisions. It affected the Act of 11 March 2004 on tax on goods and services.

Definitions of the following concepts have been introduced:

  • intra-Community distance sales of goods (IDSO),
  • distance selling of imported goods (DSOIG),
  • the role of electronic interface (platform) operators
  • special procedures, the so-called One Stop Shop – OSS (EU and non-EU procedure),
  • special procedure, the so-called Import One Stop Shop – IOSS (import procedure),
  • a simplified procedure for declaring and renewing the payment of tax on the import of goods in consignments with a value not exceeding 150 EUR.

E-commerce taxes – Marketplace

The Marketplace model is based on the fact that entrepreneurs who have websites or other portals offer products of other entities. The transaction is madeinexchange for a commission on the sales. This is an increasingly popular way of making online transactions.

The VAT Act regulates the operations of Marketplaces. It states that: when a taxpayer facilitates, through the use of an electronic interface such as a platform, commercial platform, portal, or similar means, the distance sale of imported goods in consignments with a true value not exceeding 150 EUR, it is considered that the taxpayer has independently received the goods and made the delivery.

If a taxpayer, through the use of an electronic interface, facilitates within the territory of the EU the following operations by a taxpayer without a business establishment or registered office in the European Union:

  • intra-Community distance sales of goods, or
  • delivery of goods to a non-taxable entity

– it is considered that the taxpayer facilitating this delivery has independently received the goods and made the delivery.

E-commerce taxes

E-commerce taxes – tax obligation

A platform considered to be a supplier is obliged to settle VAT like any other VAT taxpayer. It must also fulfil other obligations under the VAT regulations in force in the EU Member States.

Under the VAT Act, the tax obligation for entities facilitating goods supply arises upon payment acceptance when it comes to B2B and B2C transactions

This is the moment when the entity selling goods through the platform receives:

  • payment confirmation,
  • Payment authorization message, or
  • the buyer’s obligation to make the payment,

This is binding whichever occurs first and regardless of the actual payment of money.

Importantly, the receipt of an advance payment does not generate a tax obligation. Thus, there’s no need to issue partial VAT invoices for payment receipts before the specified transactions.

E-commerce taxes – liability

To correctly settle VAT on such transactions, it is important to have adequate knowledge of :

  • goods that are the subject of the supply,
  • the place (country) of the start and end of the shipment or transport of goods,
  • amount of the tax base.

The regulations do not specify how to verify the above information.

In the event of incorrect VAT settlement, the operator of the electronic interface acting in good faith and with due diligence does not bear the responsibility. In such a situation, the burden of proof is on the platform.

E-commerce taxes

E-commerce taxes – registration obligations of platforms

There are two scenarios regarding the record-keeping obligations for platforms:

  1. The platform facilitates transactions and at the same time is an entity considered to be a supplier. Then the obligations are the same as for other taxpayers making transactions.
  2. The platform facilitates transactions and at the same time is not an entity recognized as a supplier.

Under the VAT Act, an operator not registered for VAT OSS or IOSS must record facilitated goods supplies as other taxpayers do it if the place of taxation is in Poland. These records should be in a JPK_VAT file with a declaration and include the “IED” designation.

E-commerce taxes

E-commerce taxes – summary

The implementation of the e-commerce package in 2021 triggered many changes. Among them, there are e.g. new definitions and simplified VAT settlement procedures like OSS and IOSS. Operators of online platforms are now required to account for VAT for transactions made through electronic interfaces. Tax liability arises when a payment is accepted. This includes a confirmation, authorization, or payment obligation. The current regulations aim to simplify and tighten the tax system in e-commerce.

Are you interested in the issue of e-commerce taxes? Feel free to contact us! Our experts will answer all your questions.

FAQ – Questions and answers on the topic of E-commerce taxes

What are e-commerce taxes?

These are tax obligations regarding the sale of goods and services via the Internet.

What taxes apply to e-commerce?

E-commerce is subject to e.g. VAT, income tax and customs duty for international sales.

How to calculate VAT in online sales?

VAT must be charged by the rules of the country where the business is registered. You must also take into account EU regulations in the case of international sales.

Do I have to pay taxes on foreign sales?

Yes. Foreign sales are taxable according to the laws of the destination country and international tax treaties.

What are the reporting obligations in e-commerce?

They include filing VAT returns, reporting sales and purchases, as well as recording transactions.

What are the most common mistakes in e-commerce tax returns?

They involve failure to charge VAT, improper documentation of transactions and neglecting reporting obligations.

How can I avoid tax problems in e-commerce?

You will avoid tax problems by keeping reliable records. Remember about regular submitting of declarations. You can also consult a tax advisor.

What is OSS and how does it affect e-commerce taxes?

OSS (One Stop Shop) is a simplified VAT settlement system in the EU. It allows online sellers to settle tax for sales to different member countries.

Does dropshipping affect my tax obligations?

Yes, in the dropshipping model, tax obligations may vary depending on where the goods are stored. The country of origin of the suppliers also matters.

How to prepare an e-commerce company for a tax audit?

Preparing your company for a tax audit includes keeping accurate records. Complying with tax laws, and conducting regular internal audits is important.

Are there any tax reliefs for e-commerce?

Yes, some countries offer tax relief for e-commerce businesses. Especially for small and medium-sized businesses and startups.

What are the sanctions for incorrect tax settlement in e-commerce?

Sanctions can include fines, default interest and, in extreme cases, even criminal liability.

Featured expert

Marek Cieślak

CEO CGO Finance