Internago recently had a case with a Nordic e-commerce company selling consumer goods online to a few EU-markets. In this particular case, the company wanted to know if they were obliged to register a local company or a branch in order to pursue sales on the French market. The company in question was inclined to reduce its foreign market administration to a minimum in order to save costs and time.

So what are the rules of thumb regarding establishment on EU-markets for e-commerce and online companies?

The quick and a bit boring answer is that “it depends” on multiple factors, but the key question is the following:

Does your e-commerce company need to hire employees, open an office or own a warehouse in the foreign market?

If the answer is no to all these categories, your company will most likely be regarded as a non-permanent establishment by the local tax authorities, and hence you do not have to register a foreign company, nor a branch. You can simply pursue your sales online on the foreign market.

Yet, beware that if your company’s online sales exceed a certain threshold (35 000 EUR in most EU countries, see complete list here) it would normally be obliged to register VAT and declare VAT for its sales. If this is the case, Internago can support you and handle the VAT administration process in the country where you operate.

If the answer is yes to only one of the above categories (staff, office or warehouse), the foreign market tax authority will most likely regard your company as a permanent local establishment, and hence you would need to register as either a branch or a full legal entity on the foreign market in order to be compliant with the local tax rules. If this is the case, Internago can support you and set up a subsidiary or branch office through its online incorporation solution.

The above should be considered only as a guiding principle. Depending on your sector, specific rules may apply, which is why we always have a thorough analysis and discussion with our clients together with our lawyer and tax expert before deciding on the most suitable entry form. Specific rules may also apply if you represent a non-EU company.

Was this text useful for your company in making a future market entry decision? Please contact us for a discussion regarding your specific case and we will be happy to help you further.