Hello,
I'm running multiple e-commerce stores selling digital services (no shipping, no inventory). Customers are from more than 50 countries (50% U.S.). I'm a registered sole trader in an EU country. I'm expecting about $1M gross revenue in 2021, and $1M+ in 2022.
By far the biggest problem are the indirect taxes. I read a lot about them and talked with my tax advisor (they are also doing the accounting for me). Unfortunately, I have to collect the indirect tax (VAT, sales tax, GST) based on the buyer's country and then pay it to the buyer's country (in theory). That is practically impossible for a smaller business as every country has different tax laws, different thresholds, different rates, and different exemptions. I don't want to talk about paying it afterward (you would have to register in all those countries and communicate with them). For example, in the U.S every state and every city have different rates. Impossible to do that.
However, it is a gray-area as it is nearly impossible to proof the real location of the customer (especially when I don't have to ship). Last year I made sure that there are nearly no countries where I passed the threshold (in reality, I passed the thresholds in more countries but I moved the revenue to another country). Last year's revenue was way lower. The business is growing and it will look suspicious.
Many competitors have a free zone company in Dubai. I know that free zone business are not required to pay those indirect taxes (like the duty free shops in airports). Does that also apply to e-commerce businesses where the customer is still located in his home country? Would I have to collect and pay VAT/ sales tax/ GST when registering a free zone in Dubai?
I would be very happy for any responses.
Thank you!
I'm running multiple e-commerce stores selling digital services (no shipping, no inventory). Customers are from more than 50 countries (50% U.S.). I'm a registered sole trader in an EU country. I'm expecting about $1M gross revenue in 2021, and $1M+ in 2022.
By far the biggest problem are the indirect taxes. I read a lot about them and talked with my tax advisor (they are also doing the accounting for me). Unfortunately, I have to collect the indirect tax (VAT, sales tax, GST) based on the buyer's country and then pay it to the buyer's country (in theory). That is practically impossible for a smaller business as every country has different tax laws, different thresholds, different rates, and different exemptions. I don't want to talk about paying it afterward (you would have to register in all those countries and communicate with them). For example, in the U.S every state and every city have different rates. Impossible to do that.
However, it is a gray-area as it is nearly impossible to proof the real location of the customer (especially when I don't have to ship). Last year I made sure that there are nearly no countries where I passed the threshold (in reality, I passed the thresholds in more countries but I moved the revenue to another country). Last year's revenue was way lower. The business is growing and it will look suspicious.
Many competitors have a free zone company in Dubai. I know that free zone business are not required to pay those indirect taxes (like the duty free shops in airports). Does that also apply to e-commerce businesses where the customer is still located in his home country? Would I have to collect and pay VAT/ sales tax/ GST when registering a free zone in Dubai?
I would be very happy for any responses.
Thank you!
