In many respects online businesses are similar to physical ones. The need for registration, invoicing, collecting and keeping invoices and, of course, paying tax remains. There are some difference in the treatment of the IVA though.
CASE 1) A service or electronic item is served via the internet as part of an automatic process without the intervention of humans.
A fitness trainer prepares a set of videos to help us all to get fit. Their clients, after paying with credit card or Paypal, get access to the videos, which are visualized in streaming . In this process no human took part. It was all done automatically.
This is considered an electronic service and it has a unique treatment with regard to the IVA if it is sold to users of other countries.
CASE 2) A service is contracted and delivered via the internet with human intervention.
A law firm, accounting firm (like LimitConsulting.com) or a sales agent offers some services online but with the intervention behind the scenes of a team of people who read emails, perform the tasks and supervise the services. It does not have to be 100% human workforce; it can include an app (like Quipu) with automatic processes but humans need to be present in the process. (unlike in Case 1)
This will also be the case of agents who put in contact both parties and charge a commission to one of them for a service in which he intervenes. Examples of this case would be real estate agents.
In this case the obligations are the same as in a physical business. The internet only serves in most cases as a way of communication (in substitution of the telephone for instance ).
Normal IVA rules would apply in this case.
CASE 3) An item is sold via the internet.
An order is placed using Social Media, a website application form or email.
A catalog of items might be shown in the website but the purchase is completed off-line. The seller organises the delivery to the client’s address.
It could be that the online platform allows the purchaser to pay for his item online (Amazon) or pay at reception.
In all these cases the tax & registration obligations are essentially the same as with their physical counterpart.
If the prospect is to sell worldwide there will be obligations regarding international trading, exportation, etc… depending on the location of the potential market.
In most of these cases, if the legal form of the business is that of an autonomo, the Retailer’s Tax System will apply.
If you plan to open an online business get in touch with us. We are happy to help.