Taxes on e-commerce around the world

Share on Social Media

Taxes on e-commerce around the world

Taxes on e-commerce exist in most countries, as e-commerce is a rapidly growing industry in the Arab world and elsewhere, but taxes on e-commerce are a relatively complex topic that only a few people know about. In order to maintain the accuracy of e-commerce accounting, You need to know how taxes are calculated and which countries you pay taxes in, and this in turn depends on what your product is, how your product moves and who your buyers are.

E-commerce is subject to taxes in some countries

Here are the main factors affecting e-commerce taxes:

Physical or electronic product – Whether you sell physical goods (tableware, clothing, accessories, etc.) or electronic products (digital posters, e-books, video courses, etc.).
How your goods move – whether you are shipping goods from Estonia abroad, from China directly to a customer or using an intermediary warehouse in the EU.
Buyers – whether individuals or legal entities, within or outside the European Union.

VAT in Estonia and other EU countries

In Estonia, for example, you must register for VAT if:

Taxable turnover in Estonia exceeds EUR 40,000 per year
It sells services/goods from Estonia to private individuals in the EU
You purchase electronic services from outside (for example, using Amazon, Facebook, or Google services, web hosting, purchasing e-books, e-courses, etc.).
It purchases more than 10,000 items annually from EU countries.
The last two – the purchase of electronic services and the purchase of goods from the EU above the threshold – require limited VAT liability.
Which means you will pay VAT on services purchased abroad but cannot recover VAT on your local purchases.
Therefore, when it comes to VAT liabilities, it is wise to immediately become a “regular” or fully taxable person.
When we talk about e-commerce being subject to taxes in some countries, accounting for e-stores that sell and pay value-added tax between several countries may be a very complicated matter.
The easiest and often cheapest option is to outsource this service from Amazon, for example.

Income tax

In our article about electronic commerce being subject to taxes in some countries, and in some cases, the country of origin of payment has the right to deduct income tax from your income.
Specific rules vary from country to country, so you should familiarize yourself with them to avoid any surprises.
In particular, withholding tax is imposed on rents, dividends and interest as well as on electronic products.
For example, US payments to Estonia for the sale of electronic products (such as e-books) are subject to a 30% withholding tax.
If you have a local Employer Identification Number, you can reduce it to 10%.
Corporation tax can become an issue if you have a local store in another country or a beauty salon there, for example.
However, income tax liabilities may also arise if members of the board of directors of a company registered in Estonia reside elsewhere – for example, one of the board members resides in Spain.

sales tax

In the United States and Canada, you also need to be familiar with the concept of sales tax, which is different from our value-added tax and is calculated by state.
In general, the US tax system is so complex that an Estonian accountant cannot help you here. And certainly don't expect the US tax authorities to turn a blind eye in some places – the rules are very strict there.

Tax on in some countries:

Tax on e-commerce in the Kingdom of Saudi Arabia

Speaking about e-commerce being subject to taxes in some countries, the Kingdom of Saudi Arabia is a member of the Gulf Cooperation Council and has implemented the group’s policy regarding digital value-added tax from foreign sellers.
The VAT rate for digital products is 15% with no registration limit.
Foreign companies must register for VAT in Saudi Arabia.

South Africa

South Africa introduced its own VAT rules for electronic suppliers on 1 July 2014.
However, they have a lower threshold, as VAT is not required to be collected or registered.
That's 1,000,000 South African Rand.
Unlike other countries, South Africa does not distinguish between B2C and B2B sales – all are subject to a 14% VAT duty.
Pretty much any type of digital service you can think of is within the scope of their e-VAT rules.

The way to e-commerce in Türkiye

When we talk about e-commerce being subject to taxes in some countries, since January 1, 2018, Turkey has been asking foreign companies that provide digital goods within the country to pay attention to value-added tax laws.
Digital tax policies in Turkey depend on whether the sale is to a private consumer or to a VAT-registered Turkish company.
If you are selling to a VAT registered business in Turkey, the foreign business does not need to charge VAT.
The buyer will handle all Turkish VAT through a reverse charge mechanism.
If selling to Turkish consumers, foreign businesses must:
Registration for VAT in Türkiye.
There is no limit to recording sales. It is possible to register directly as an employer, online through MERSIS, the Commercial Register.
Imposing an 18% value-added tax on digital goods and services sold to Turkish consumers.
File VAT returns every month. Deposits are due on the 24th of the following month, and payments are due on the 28th.

Some countries that introduced digital tax in 2020-2021

In 2021 Cambodia introduced a 10% VAT for non-resident sellers with a minimum of SEK 250,000,000.
Cameroon has expanded the obligation of non-resident companies to impose and collect VAT on the provision of physical goods and electronic services to consumers and businesses.
Chile introduced a 19% VAT on 1 June 2020, and the tax will be collected via non-resident provider VAT registrations, or on a withholding basis by payment providers, including credit card companies.
In our talk about e-commerce being subject to taxes in some countries, Egypt introduced in 2021 a 14% value-added tax for non-resident sellers with a minimum of 500 thousand Egyptian pounds.
Indonesia charges a 10% VAT on all online transactions, with a minimum of IDR 600,000,000.
Kenya in 2021 introduced a 16% VAT on all non-resident seller transactions, meaning the threshold is zero. VAT must be collected from the first sale.

At the end of our article on e-commerce being subject to taxes in some countries, as a digital business owner, you really need to recognize and understand where foreign tax rules may apply to your business. The best source to ensure that you do not get into any trouble is to ask a qualified accountant or agent. Within the country you want.

Share on Social Media

Click to rate this post!

[Total: 0 Average: 0]

Taxes on e-commerce around the world