Why?

The ultimate purpose of VAT/GST is to impose a broad-based tax on final consumption by households. Typically, VAT/GST is collected through a staged process, which means that each business in the supply chain charges VAT/GST to its customer, regardless of whether the customer is a private individual or a business. In that sense, businesses serve as unpaid tax collectors for the government. They pay to the competent tax authorities the VAT/GST which they charged on their supplies and received from their customers. Since it is not the purpose of VAT/GST to tax businesses, VAT/GST systems employ mechanisms for relieving businesses of the burden of the VAT they pay when they acquire goods or services.

Two methods

Basically, there are two methods to achieve a neutral result for businesses. The first one is the so-called “invoice-credit method”. In this methodology, each supplier in a supply chain charges VAT on each of its supplies. This amount is shown on the invoice to the customer. In his turn, the customer can credit that input tax against the output tax charged on his supplies if he is legally a business as well. Then, the customer remits the balance of the input and the output tax to the tax authorities. He receives a refund if there are excess credits.

The second method is the "subtraction method", which is effectively an accounts-based method. However, this method is not used that often as almost all jurisdictions that employ a VAT use the invoice-credit method. As a matter of fact, within the Organization for Economic Co-operation and Development (OECD), only Japan uses the subtraction method.

For more information on VAT/GST and other ecommerce related topics, please visit the Online Taxes & VAT topic on EcommerceWiki.

The post The different rules on taxations when trading cross-border appeared first on Cross-Border Magazine.

The EcommerceWiki is a new platform for sharing information about e-commerce. Created jointly by Ecommerce Europe and the Ecommerce Foundation, the EcommerceWiki has been developed in order to provide a single source of information for the e-commerce sector and easy access to knowledge on essential topics such as cross-border e-commerce, omnichannel architecture, online taxes and B2B e-commerce.

“A large amount of information about the e-commerce industry can be found over the web, but generally the content is not well organized and not always reliable. In a more and more digital world, there is an increasing need for retailers to be informed about the sector, the markets and upcoming trends. This is exactly why we decided to develop this one-stop shop on e-commerce”, says Jorij Abraham, Director of the Ecommerce Foundation.

Stimulating cross-border e-commerce through knowledge
According to the Cross-border Ecommerce Barometer 2016, the main barriers for merchants willing to sell across the border are legal fragmentation, taxation systems (VAT) and logistics or distribution. “Access to information and knowledge sharing can help to overcome these barriers and stimulate cross-border e-commerce, which is Ecommerce Europe’s goal too”, says Marlene ten Ham, Secretary-General of Ecommerce Europe. Sharing is indeed the key word. Thanks to the wiki format, everyone can add new and inspiring content while it is monitored by a group of curating experts ensuring the content is structured, accurate and up-to-date. The result is: one single platform with an online handbook providing definitions and guidelines, but also a place to connect people, find the latest reports, or major e-commerce events. Everyone with an account can upload their relevant content, including reports, events information and videos, for free so that they can reach a larger and international audience.

Marlene ten Ham further explains the importance of the EcommerceWiki: “This platform can play a pivotal role for online shops in Europe and worldwide as experts translate their knowledge into valuable content, turning the platform into a major source of information for the e-commerce sector.”

The EcommerceWiki is initiated by the independent Ecommerce Foundation and Ecommerce Europe. The new platform is also supported by e-commerce associations from other parts of the world, including Shop.org (USA), NORA (Australia), ABComm (Brazil), BECA (China), and HKFEC (Hong Kong).

The post Launch of the EcommerceWiki: boosting cross-border e-commerce by sharing knowledge appeared first on Cross-Border Magazine.