Running a webshop looks simpler from a bookkeeping perspective than it actually is. As soon as you sell to customers across Europe, sell via a marketplace such as bol.com or Amazon, or have to deal with inventory and returns, quite a bit of administrative work is added. In this article we discuss the main points of attention for the bookkeeping of webshops and online sales.
Short answer
The biggest challenges in the bookkeeping of a webshop lie in VAT remittance on sales to consumers in other EU countries (which the OSS scheme is designed for), the way you value and process your inventory, the processing of returns, and the administration around sales via marketplaces that withhold commission and sometimes VAT themselves. Well-organised bookkeeping keeps these processes separate and clear, so that at the end of each quarter or year you know exactly where you stand.
The OSS scheme: VAT on sales to other EU countries
If, as a webshop, you sell products to private individuals in other EU countries, you must in principle remit VAT in the customer's country as soon as you exceed a certain revenue threshold for cross-border sales to consumers. Without a separate scheme, this would mean having to register for VAT separately in every EU country, which would be an enormous administrative burden for most webshops.
The OSS scheme, which stands for One Stop Shop, solves this. With the OSS scheme, you declare the VAT on all your sales to consumers in other EU countries through a single, combined return with the Dutch Tax Authorities, instead of through separate registrations per country. For each order you still calculate the VAT rate of the customer's country, so a German customer pays the German VAT rate and a French customer the French rate, but the remittance itself runs through one central return.
For your bookkeeping this means you need to track, per country, how much you have sold and at which VAT rate, so that the OSS return can be drawn up correctly. Many webshop platforms and bookkeeping packages can split this out automatically, provided the country settings and VAT rates are set up correctly. As long as you stay under the revenue threshold for cross-border sales to consumers, you are often still allowed to simply charge Dutch VAT, but as soon as you exceed this threshold, the obligation applies to use the VAT of the destination country. Because threshold amounts and rules can change and can differ per situation, for example if you also hold physical inventory abroad, it is wise to discuss this periodically with your bookkeeper.
Example
A clothing webshop sells via its own site to customers in the Netherlands, Belgium and Germany. As long as the combined revenue from sales to consumers in other EU countries stays under the applicable threshold, the webshop simply charges Dutch VAT. As soon as the combined revenue from the Belgian and German sales exceeds the threshold, the webshop must start applying the Belgian or German VAT rate, respectively, to those sales and remit it via the OSS return.
Inventory valuation: more than just tracking what's on the shelf
For a webshop, inventory is often a significant cost item, and how you value it has a direct effect on your profit and therefore on your tax return. Important points of attention are:
- Purchase value versus sales value: inventory is in principle recorded in the books at purchase value, not at the sales price. Profit only arises at the moment of sale.
- Obsolete stock: products that are no longer readily sellable, for example due to ageing, seasonal effects or damage, can often be written down to their lower market value. This requires a periodic assessment of your inventory.
- Inventory held abroad: if you use a fulfilment service that holds inventory in several EU countries, as is often the case with sales via certain marketplaces, this can even make a local VAT registration in that country compulsory, separate from the OSS scheme.
A periodic stock count, for example quarterly or at least annually, is for most webshops not an unnecessary luxury but a necessity to keep your bookkeeping and the actual situation aligned.
Processing returns correctly
Webshops generally have a higher return rate than physical shops, certainly in sectors such as clothing and footwear. Returns affect several parts of the bookkeeping at once: revenue must be corrected, the VAT on the credited amount must be reversed, and the product must be added back to inventory, unless it comes back damaged and is no longer sellable.
If you work with a credit note for every return, it is important that it is processed consistently and promptly, so that your revenue and VAT return give an accurate picture. With a high volume of returns, it pays to automate this process as much as possible through your webshop software, so that returns are not tracked separately from your regular order administration.
Selling via marketplaces such as bol.com
Many webshops sell not only through their own site but also via marketplaces such as bol.com, Amazon or Etsy. This brings its own bookkeeping considerations:
- Commission and fees: marketplaces charge commission on the sales price, often via a periodic collective invoice. These costs must be processed separately from the revenue from the sale itself.
- Payouts versus revenue: the amount a marketplace pays out to you is usually already corrected for commission and any other costs. For accurate bookkeeping, you need to record gross revenue and the withheld costs separately, rather than only booking the net amount paid out.
- VAT responsibility: for sales via certain platforms to customers outside the Netherlands, part of the VAT handling can lie with the platform itself. It is important to know, per marketplace, who is responsible for which part of the VAT remittance, to avoid double remittance or missing VAT altogether.
A webshop that receives a monthly collective invoice from bol.com for commission, shipping costs and any advertising costs would do well to consistently match this invoice against the underlying sales, so that the gross margin per sales channel remains clear.
Purchasing outside the EU: dropshipping and the article 23 licence
Some webshops do not buy products from a Dutch or European supplier, but directly from a supplier outside the EU, for example dropshipping from a country such as China. When importing goods from outside the EU, VAT must in principle be paid to customs on every shipment, which quickly results in a significant and irregular cash flow for a webshop with many small shipments.
To prevent this, as an entrepreneur established in the Netherlands you can apply to the Tax Authorities for what is known as an article 23 licence. With this licence, you do not have to pay the VAT directly to customs on import, but instead declare it through your regular VAT return, together with the input tax deduction to the extent you are entitled to it. For your bookkeeping this means that import VAT is not processed as a separate payment per shipment, but as part of the periodic VAT return, which considerably improves clarity with regular imports from outside the EU.
If you work with dropshipping, it is also important to map out clearly who in the chain is responsible for VAT remittance on import and delivery to the end customer. This can differ per supplier and per country of destination, and is not always the same as with regular inventory sales. Have this chain assessed by your bookkeeper if in doubt, certainly before you start purchasing on a larger scale outside the EU.
What can you do yourself to keep your bookkeeping clear?
- Link your webshop software and any marketplace accounts directly to your bookkeeping package wherever possible, so that orders, returns and VAT rates are passed through automatically.
- Track revenue separately per sales channel, and for international sales per country, so you can easily assess whether you are approaching the thresholds for the OSS scheme.
- Count your inventory periodically and assess which products need to be written down.
- Process returns promptly and consistently, preferably automated through your system.
- Keep marketplace collective invoices carefully and link them to the correct period in your records.
Frequently asked questions
Do I need to register separately for VAT in every EU country where I sell?
With the OSS scheme, this is in most cases not necessary: you declare VAT on sales to consumers in other EU countries through a single, combined return in the Netherlands. Only in specific situations, for example when you hold physical inventory in another EU country, might a local registration still be required.
How do I process bol.com's commission in my bookkeeping?
You process the commission and other costs withheld by a marketplace as a separate cost item alongside your revenue. This keeps it visible what your gross revenue per sales channel is and what the actual margin is after commission and other costs have been deducted.
What happens, for tax purposes, with products that come back as returns but are damaged?
If a product is no longer sellable, it cannot be booked back into inventory at full value, but must instead be written down or written off as an inventory loss. This affects your profit in the relevant financial year.
From when do I need to use the OSS scheme?
This depends on your revenue from sales to consumers in other EU countries. As long as you stay under the applicable threshold, you are generally allowed to keep charging Dutch VAT. If you exceed this threshold, you are obliged to calculate and remit VAT at the rate of the customer's country. Because thresholds can change, it is wise to have this checked periodically.
I buy products from outside the EU, for example for dropshipping. Do I then have to pay VAT to customs on every shipment?
Without additional measures, that is indeed the starting point for imports from outside the EU. With an article 23 licence from the Tax Authorities, however, you can process the import VAT through your regular VAT return instead of paying it per shipment at customs, which is considerably clearer, especially with regular imports.
Is the OSS scheme mandatory?
No, participation in the OSS scheme is in itself a choice, but as soon as you exceed the threshold for cross-border sales to consumers, you do have to remit VAT in your customers' countries one way or another. For most webshops, the OSS scheme is then by far the most practical solution, since the alternative would require separate registrations per country.
Take a look at our approach to bookkeeping for e-commerce and webshops or the full overview of our services.
