The online market today is no longer a fad but a reality, every day millions of consumers buy products online without the need to leave home. Can you imagine the business possibility that this implies? For the same reason and if you have an online business that you want to start or simply already have a physical business without an internet presence, you will be interested in knowing what e-commerce is, what possibilities it offers you and what is the taxation in Andorra that accompanies it .
What is e-commerce?
Surely you have heard this term numerous times. You may even have come to think that it is a very complex term, because none of that, quite the opposite! The word e-commerce is used to simply define the internet as the market for the sale of any type of product or service.
What advantages does e-commerce offer?
The possibility of operating in a non-physical market such as the internet offers us a wide variety of options and the main advantages that we can quickly identify from a good start are the following:
– Business open 24 hours a year without the need to open and close your business every day.
– Increase your sales thanks to the world market offered by the internet.
– Clients from anywhere in the world and anywhere.
– Greater knowledge about your clients to be able to offer them exactly what they need at all times and classify what their needs are.
– The online market does not need a stop. Reduce costs. Forget (if you want) to have a real estate store or to worry about looking for a great place in a good location.
In summary, the online business or e-commerce offers us the possibility of expanding the market, increasing our turnover and our profits from a computer or from any electronic device, directly from home, while on vacation or from the same office.
So far the concept would be simple and the possibilities offered by the online market would be many, things get slightly complicated if we analyze what types of e-commerce exist and which of them can end up adapting more to our business reality.
Types of e-commerce
It will be essential to make a basic classification to identify the target target to which you want to direct the sale of products or services. Likewise, and as in the traditional market, in e-commerce there are also different business models within it. Next, we will highlight how online stores are classified, what are the most used business models and what key elements we should consider from the point of view of e-commerce taxation in Andorra.
Online stores, according to the type of business relationship, are classified as follows:
B2B -Business to Bussines or business to business- as the name indicates, it would be business between companies. This type of online stores are usually web portals with different prices where the professional has to register to make the purchase. In these types of stores there is also the possibility of making quick purchases with personalized payment methods for each client.
B2C– Bussiness to costumer or company to final consumer.-In this case the company or professional sells its products to final consumers. It would be the classic and most common example of an online store.
C2B – Consumer to Business or final consumer to company – in this case the final customer is the one who offers a product or service to a company or professional.
C2C– Consumer to Customer consumer to final consumer- the final customer sells a product or service to another final consumer. The clear example of this model is found in the online portals for the sale of second-hand products.
From the tax perspective, it will have to be clearly identified how we are going to operate and with whom, since they will be essential elements, take into account what our tax obligations may be, how we will have to bill in each case and if it will be necessary or not, include any type of tax such as IGI (general indirect tax, which would be for comparative purposes in Spain with VAT) on the same invoices.
The most important business models of e-commerce are:
Dropshiping: it is a booming sales method within online stores. The main reason for its existence is that it is not necessary to have stock of the products that are marketed. Each time a sale is closed, the product sold to a third party (usually the wholesaler or manufacturer) is bought and the latter dispatches the product directly to the customer. The taxation that accompanies this business model is complex and it is essential to analyze in detail the operations, the locations and the entities that participate in it. In future posts, we will analyze in particular and in detail the key points of the taxation of this business model.
Virtual market place or virtual store with its own products: it is the most common method that is normally completed with physical points of sale. In this case, there is usually stock. From the point of view of taxation, it will be essential to analyze the origin of the stock to take into account the tax burden that we can bear in the acquisition of the products with which we are going to market and on the other hand we will have to bear in mind that, fiscally In many cases it will not be the same to sell the same product from a physical point than from the e-commerce itself.
Membership: this type of trade is established under two basic principles, membership and fees. The client makes a periodic payment to have a series of products from time to time. The key from the tax point of view of this business model will be to correctly identify the location of our clients and the tax particularities in the shipments of products if they are outside Andorra.
Web services or web services: in this case it must be very clear that products are not sold. Web content of any type is offered that can be consumed directly from the same portal. At the tax level, they will be key elements to analyze the location of our clients, under what condition they operate on our portal and the type of service offered in the latter.
Marketplace: in this type of business we can find products from different brands. The classic and best-known example on the internet today would be Amazon. At the tax level, together with dropshiping, it will be the most complex to analyze due to the different variants that we can find in this.
Finally, what should I take into account from a tax perspective if I want to start / strengthen e-commerce in my business and from Andorra?
The non-obligatory nature of having a physical space and the possible diversity of the origin of the income derived from a business such as e-commerce, makes this type of business very interesting to start or promote it (if you already have it) from a country with low taxation such as Andorra.
Likewise, the country of the principality could be a good strategic place if we want to implement our e-commerce model throughout the European continent. Without forgetting from a more technical point of view, that the fiscal pressure offered by this country in comparison to its European neighbors is much lower. The most significant example in these terms is found in the same corporation tax where the tax rate is 10% or in the same IGI where the average rate is only 4.5%.
In summary, first of all it will be essential to analyze the business model that we want to establish and what type of online store we want to have, in order to then be able to identify and analyze the tax burden that each operation can bear. For the same reason and as soon as you have identified which business idea you want to implement / improve in the world of e-commerce from Andorra, we recommend that you contact us so that we can advise you from the best tax perspective so that you do not stop complying with any tax obligation, optimizing your taxation to the maximum in the world of e-commerce.