An increasing number of entrepreneurs are choosing to sell their products through online platforms as part of e-commerce. For those entering this business, issues related to settlements are often a barrier. This is particularly important in light of ongoing tax obligations and the tax authorities being equipped with additional tools for control. In this article, we will explore how settlements for the sale of digital products on the ETSY platform work. We’ll consider how should you documment your sales (invoicing the customer or invoicing ETSY)? What to do with the cost invoices? Should you register for VAT-EU?
Sale of digital products – invoicing ETSY
In this post, we address the sale of digital products through the platform. It is important to note that the sale of physical products entails completely different obligations!
Documenting the sale?
The first question that arises here is how to document the sale. Do I need to issue an invoice/receipt for each individual customer making a purchase? Such a solution would be extremely time-consuming and, at times, could make the sales process itself ineffective. The information and regulations of the platform itself do not provide us with an answer on this matter. Therefore, it is worth looking for information in the regulations.
What do the regualtions say – invoicing ETSY
In the first place, we have European Union law regarding VAT.
Article 9a(1) of Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 laying down implementing measures for Directive 2006/112/EC on the common system of value-added tax.
In the case where electronically supplied services are provided through a telecommunications network, interface, or portal, e.g., an app store, it is considered, for the purposes of Article 28 of Directive 2006/112/EC, that the supplier participating in the provision of these services is acting in his own name but on behalf of the supplier of those services, unless that supplier explicitly indicates otherwise and that is reflected in the contractual arrangements between the parties. (…) Regarding national regulations, we have Article 8(2a) of the VAT Act.(…)
Regarding national regulations, we have Article 8(2a) of the VAT Act.
Article 8(2a) of the VAT Act.
In the case where a taxpayer, acting in his own name but on behalf of a third party, participates in the provision of services, it is assumed that this taxpayer has himself received and rendered these services.
Of course, both of these regulations have many exceptions and reservations. Due to frequent changes in the regulations of these platforms, each situation should be considered individually. Nevertheless, we can assume a common denominator that, in the case of services provided electronically, the seller should be the platform offering these services.
Invoicing ETSY or the customer?
Keeping the above in mind, in such a situation, it would be reasonable to assume that ETSY is the recipient of the electronically provided service, and to issue an invoice to this entity. Such an invoice, in accordance with all rules regarding electronically provided services, should be issued to a foreign entity using the reverse charge mechanism.
In other words, an appropriately named invoice is issued for the gross amount = net amount. We do not show VAT on it (it is not subject to taxation in Poland). The buyer, in this case, ETSY, is responsible for calculating and remitting VAT.
However, it is important to remember that for such sales:
a) correctly present it in the JPK_VAT file (for active VAT payers);
b) provide ETSY with an invoice (keeping proof of delivery);
c) record it in the VAT-UE information – here we indicate that such a sale generally creates an obligation to register for VAT-UE.
This is the first of a series of posts explaining the essence of selling on electronic platforms. Additional publications will follow soon.
How can we help?
We support our clients through individual consultations. We verify their individual situation, check the extent to which they are subject to registration obligations (VAT-UE, VAT-OSS), and review the regulations they have accepted. We ensure the correctness of settlements and assist in launching sales on a given platform. In this case, an analysis of the contract and regulations, as well as an analysis of the goods/services sold, is usually necessary. We individually prepare relevant calculations. During individual consultations, we clarify any questions or doubts and discuss possible ways to reduce tax risks.
In more complex cases, we assist in preparing an application for interpretation to the National Tax Administration and indicate the necessary changes to be made in the CEIDG.
If you have questions about applying for a lump sum, please visit www.outsourced.pl .
