Marketplace

What it means

A marketplace is an online platform where many sellers offer goods or services and customers buy in one place. The operator provides the technology, marketing, often payments and sometimes logistics, and charges sellers commission or fees for it.

For a seller, a marketplace is a quick route to a large audience without its own online shop or expensive marketing. The price is the commission, the platform’s terms, dependence on its rules and limited contact with the customer, who belongs more to the platform.

Legally and for tax, marketplaces are specially regulated. Under the DAC7 rules platforms must report sellers and their income, and for some sales of goods by sellers from outside the EU they themselves become the deemed supplier for VAT.

How it works in practice

When selling through a marketplace, sales are recorded gross and the platform’s commission as a cost, not just the net amount the platform pays out. The basis is the platform’s monthly statements, which must be matched to individual orders and payouts to the bank account.

For sales to consumers in other EU countries, once the common threshold is exceeded the VAT of the customer’s country applies, most often through OSS. If the platform stores goods abroad through fulfilment, moving stock to a warehouse in another country may require VAT registration there.

Platform fees and commissions are usually invoiced from abroad and subject to VAT self-assessment. For small firms that are not VAT payers this can mean having to register under Section 7a, which is often overlooked when sales start.

What to watch out for

The most common mistake is booking only the platform’s payouts as income. Sales are then understated, commissions are missing from costs and VAT is worked out on the wrong amount. At an audit the tax office compares the data reported by the platform with the return.

The second risk is dependence on a single platform. A change in commission or rules, or a blocked account, can stop all sales overnight. It is wise to build your own channel and customer base as well.