Navigating Portugal's eCommerce tax landscape: understanding the One-Stop-Shop

In recent years, the eCommerce sector has witnessed exponential growth, transforming the way businesses operate and consumers shop. With this digital revolution comes a complex web of regulations and taxes, particularly in countries like Portugal, where the eCommerce market is flourishing. According to Statista, the Portuguese eCommerce market revenue is projected to reach €7.3 billion by 2024, reflecting a steady upward trajectory. Understanding the tax implications is crucial for businesses to thrive in this dynamic landscape. One significant development in the European Union (EU) that impacts eCommerce taxation is the introduction of the One-Stop-Shop (OSS) mechanism.

Taxation Challenges for eCommerce Businesses

eCommerce taxation can be intricate due to the cross-border nature of online transactions. In Portugal, like many EU countries, businesses engaged in eCommerce must navigate Value-Added Tax (VAT) regulations, which vary depending on factors such as the type of goods sold, their destination, and the seller's location. This complexity often leads to compliance issues, especially for small and medium-sized enterprises (SMEs) operating across borders.

Introducing the One-Stop-Shop

To streamline VAT compliance for eCommerce businesses operating within the EU, the European Commission introduced the One-Stop-Shop (OSS) mechanism as part of the VAT e-commerce package, which came into effect on July 1, 2021. The OSS enables businesses to declare and pay VAT on their cross-border sales of goods and services to consumers within the EU in a single Member State, rather than registering for VAT in each country where they have customers.

Benefits of eCommerce Platforms for OSS Compliance

Utilizing eCommerce platforms for OSS compliance offers several benefits for businesses:

• Streamlined Operations: eCommerce platforms streamline VAT compliance processes, allowing merchants to focus on growing their business without being burdened by administrative tasks.
• Accurate Tax Calculation: Built-in tax calculation features ensure that VAT is accurately calculated for each transaction, reducing the risk of errors and compliance issues.
• Efficient Reporting: Integrated reporting functionalities simplify the generation of VAT reports required for OSS compliance, saving merchants time and effort.
• Flexible Scaling: eCommerce platforms are scalable, allowing businesses to adapt to changing VAT regulations and sales volumes seamlessly.
  

How Do eCommerce Platforms Manage the OSS?

eCommerce platforms play a crucial role in facilitating VAT compliance for businesses operating within the EU. These platforms, such as Amazon, Shopify, WiX, Etsy, WooCommerce, and Magento, offer built-in functionalities or integrate with third-party solutions to help merchants manage their VAT obligations effectively. Here's how they typically manage the OSS:

1. Integrated Tax Calculation: eCommerce platforms often integrate with tax calculation services or plugins that automatically calculate VAT based on the customer's location and the type of goods or services sold. This ensures accurate VAT calculation for cross-border transactions, including those covered by the OSS.
2. OSS Registration and Reporting: Some eCommerce platforms provide features that allow merchants to register for the OSS directly through their dashboard. Once registered, merchants can generate VAT-compliant invoices and reports required for OSS reporting and compliance.
3. Threshold Monitoring: eCommerce platforms may include features that enable merchants to monitor their sales thresholds and automatically trigger OSS registration when necessary. This helps businesses stay compliant with VAT regulations as their cross-border sales grow.

What do e-commerce platform miss

E-commerce platforms have many useful features to manage VAT, but all of them hide critical compliance flaw.

Every major e-commerce platform makes a vague disclaimer that the invoices generated by the platforms are actually Payment requests, not invoices, and it is Seller’s responsibility to make sure that Invoices he generates are in compliance with local regulation.

You can find the following disclaimers in all major platforms. below are a few examples:

Amazon disclaimer:

WIX disclaimer:

What it means for the seller, is that in addition to “Platform invoices” he must issue and send to each client an additional e-invoice or “Tax invoice” which is in compliance with Portugal SAFT standard and communicated to Portuguese financial authority - Autoridade Tributária (AT).

This SAFT invoices can be issued only by software, certified by AT.

You can read further about SAFT standard here.

Also, you can find list of AT certified software here.

How Kilobanan can help

Being a digital-first company, Kilobanan uses ROSE Primavera software, which is certified for issuing e-invoices, compliant with SAFT standard. For our customers we offer an Integration capabilities with major e-commerce platforms, which would allow your business to:

• save time and cost on searching and integrating stand alone invoicing solution;
• scale your e-commerce business efficiently by automatically handling both accounting and invoicing data;
• be fully compliant with all VAT Accounting requirements in Portugal with just one partner.
  

If you'd like to know more on how Kilobanan can help your e-commerce business, feel free to book an online consultation with one of our specialists using the link below and get 20% discount using promo code KILOBLOG.

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