Simple Rules for Entrepreneurs on the Internet
E-commerce is regulated by different rules and laws. It is liable to taxation as well as any other business. Usually companies that practise sales via Internet work in different countries. And it is natural that different countries have different legislation about e-commerce. Some of legislation systems are well developed, other are new and chaotic. But there are features that are common for all of them. It is likely that economic crimes and cheating are not legal in either country. Also it is easy to see that there are common points in tax system of different countries. Here we will try to list most essential moments of EU legislation on e-commerce as an example. Following these rules would be reasonable in other countries as well.
1) Meet the Requirements of the EU Distance Selling Directive
The EU Distance Selling Directive states that merchant shall provide contact information, address and phone number. Fulfilling this requirement is not difficult if the companyâ€™s activity is legal. Also this is good for business, because customers get more grounds to trust your company.
2) 7 day return
According to the same law customers shall have 7 days to return goods if they are not of appropriate quality. But this is not only a norm of legislation. Many companies offer the return period that is even longer. This may be used to attract customers to the company. The period may vary from country to country.
3) VAT registration
If the companyâ€™s sales exceed ?60,000 per year it needs to register value added tax. Otherwise VAT shall not be neither registered nor charged. In different countries the limit may vary, but the rule is basically the same.
4) Shipping tax
Not all goods are liable to VAT, and the shipping tax depends on that. Study the legal issues of VAT to arrange everything properly with this tax.
5) Taxation issues of buyers from other countries
There is a rule that customers buying goods abroad and registered for VAT in their native country may be exempted from it. For that they shall just quote their registration number to the merchant. It is good for business if your company is able to handle operations with such customers.
6) Cases when VAT rate of other country is applied
If the scope of sales is large enough and financial parameters are over certain limit company is liable to extra regulation. If the certain limit is exceeded the rate of VAT applied shall equal local VAT of the country where it happens. For example, if UK merchant has successful sales in France he shall charge not 17,5% as according to UK regulation, but use French rate of VAT instead.
Merchant who acts on the territory of other country shall respect local legislation and taxes, but also protect his business from extra payments. For example UK business shall pay taxes to EU. But in US taxation is different. For example the US may imply tax on sales into US area. But UK merchant shall not charge this tax. Study local legislation and make sure you really have to pay this or that tax the country wants to charge from you.
8) Service disabled visitors
There is a law that merchant shall provide access to his site for individuals with certain disabilities. This requirement may imply providing text description for all images for those who can not deal with images. But this small technical improvement will bring additional customers to your shop and give you additional profit.
Company may need registration at http://www.dpr.gov.uk/. Other countries may need different kinds of registration. Some of them may be paid.
10) E-mail rules
It is not legal to send advertisement by e-mail unless the owner of e-mail allows this himself directly, for example if he subscribed to the companyâ€™s news. But there is an exception from this rule. If contact information was given while purchasing something from your shop by the customer, company may use this contact and provide more information. But then customer shall have possibility to stop such sending.
It is not really difficult to follow all these rules. As you see e-commerce legislation is fresh. So it is quite advanced, clear and logical. In many cases complying legislation gives certain benefits to business. Legal status and providing information allow customers to qualify your company as stable and trustworthy and give you an advantage comparing to anonymous firms that come from nowhere and do not bare any responsibility.
Actually knowing these rules you will likely avoid problems with the law, yet it is reasonable to examine legislation of the country before you start business there. Some local peculiarities unnoticed at the beginning may bring unpleasant surprises or even big problems in future. So it is better to spend some time and protect yourself from such kind of discoveries.
Legislation and taxation are quite important for business. But there is also another set of laws that are not registered in any documents, but yet regulate business life of the country. These are culture and traditions. Knowledge about such unwritten rules and peculiarities may add much to your success in other country.