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Currently, with all the power the Internet provides, it's relatively easy to start online business. There are no obvious restrictions on the process. A business from almost any location can sell intangible goods or services online and the purchases can be made from all over the world.

It's technical.

But what about legal restrictions and tax liabilities? How do they affect the global online business?

I mean, how do the following factors and their combinations influence the possibility to sell online:

  • the location of buyer

  • or the location of the bank, in which the account, receiving payments, is registered

  • or the place, where the company which receives payments, is registered?

Or maybe something else?

I know, the question is pretty broad to answer it completely, but there is no need in such an academic answer. Please, just share your personal particular experience in overcoming above mentioned problems (or maybe you have never faced such problems at all).

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Also the location of the web server from which the goods are sold. – Mike Sep 28 '10 at 18:35

3 Answers

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+50

Rem, the world has surely become flat. You can set up an online business from practically anyplace which has a wire. There are multiple aspects to cover while answering your question.

First, the legal aspects. The business you start, will be governed by the law of the country the business is based in. You will be required to comply with the local laws for compliance, taxation etc. So the bank and company laws of the country will be applicable

Then, the business agreements will come into the picture. So if you are selling a product or service, you would be having an agreement with the buyer. The agreement would include the price, the products/services that need to be delivered. Generally this agreement would also cover what happens in case of a dispute. Generally an agreement can cover which jurisdiction will apply (the buyer's or the seller's). This agreement would be specific for your product or service. The agreement may also define the payment terms

If any of the terms in agreement are breached, then you can go for third party arbitration

Third, you would need to consider the payment for the products or services you deliver. Common ways of receiving payments are via Paypal, Wire Transfer, Credit Cards etc. Generally these platforms have their own set of rules and how you get the money in your hands is subject to local laws.

Today, there are various services and tools available that make Global eCommerce viable

Here are some of them

Marketplaces - eBay, Etsy Payment Services - Paypal, Moneybookers , Square Arbitration Services - net-Arb
Escrow Services - Escrow.com Online Invoicing and accounting -Freshbooks, Xero etc

I guess this should be good enough to get started. You can also make the question specific to your country, and I am sure the experts from that country would pitch in

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Also sales taxes generally depend on the location of the buyer. – Mike Sep 28 '10 at 18:37
Restrictions on what you sell can be affected by all the locations (buyer, website, company) - this is one reason why sites often avoid gambling/pornography. Too complicated to make sure the transaction is legal in all the jurisdictions involved. Basically every jurisdiction wants to legislate / tax you if they can establish a plausible reason to do so. (Although technically with sales taxes the tax is on the buyer - you're just acting as a tax collector) – Mike Sep 28 '10 at 18:48
up vote 1 down vote

This isn't so much an answer, but a reference to another question. I asked a very similar question the other day (before I saw this one). The question was: "Where should I set up my global internet business?"

I suggest having a look because the responses so far have been very useful.

Cheers, Trish

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Thanks, Trish, for letting me know. +1 – rem Nov 27 '10 at 11:02
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Yes.

Dumb answer perhaps but all of those can potentially impact the business. The real answer is to get legal and accounting advice (or educate yourself) to determine the specifics of your situation.

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