What are the legal requirements to start an eCommerce?

So, you have an idea and it’s a really nice one. After thinking it through, you decide to move on with it and start your own eCommerce or online business.

Everything is going great until…

Wait a second! The paperwork?

Yeah, everything that has to do with…

  • Hacienda (Treasury Department).
  • Social Security.
  • Privacy and data protection… 

You’re in for a not-so-sweet treat in terms on Public Policy bureaucracy here…

Is that going to be too much of a hassle?

In this post you’ll learn about every single requirement you must comply with, and what exactly is it you have to do to start your eCommerce safely so as to avoid any potential fines.

Are you ready to defeat bureaucracy?

Let’s get it done.

Why is it important to know the legal requirements?

When we set off to starting an eCommerce, there are a lot of issues we research on:

But when the moment of truth comes, do we really know what are the legal requirements for our eCommerce?

Nobody likes to pay taxes, but it’s important to know what you have to do to comply with legal standards from the very start to spare ugly surprises.

Let’s be realistic: it’s a bit annoying. When someone has a business idea, they just want to execute it —not standing in multiple lines or filling out forms.

Let’s not even talk about making payments.

There are different ways of handling it:

  • Not doing anything about it: people will start a 100% online store without officially registering it (before the Treasury Department, no permits or licenses, etc.). You’ll think it’s crazy, but actually a lot of people try their luck like this. 
  • Trying to comply with the law: this is most likely you if you’re reading this, or people who want to rest assured their business is legal, even though they’re not too happy about making lots of payments. 
  • Complying with requirements that don’t even exist: there’s a type of entrepreneur who feel safe only when the 150% of things are under control. They can’t stand a minimum risk and they prefer to be safe than sorry —a far more advisable choice than the first way of handling things.

For every situation, you’ll learn the choices you’ll have and the potential consequences.

What do you have to do before starting an eCommerce?

So you’ve already taken action, your website is up and running and you’re starting to get potential customers.

What process should you start first?

Register in Hacienda (Treasury Department)

Even if online, your business activity is still a business. You’ll save all the paperwork derived from starting a physical store in terms if the location, but you must still report it to the Treasury Department. 

This is simply to let them know you’re starting a commercial activity; it entails nothing else than paying the fee of the corresponding form.

Any commercial activity is subject to VAT in Spain (if you’re in a different country, then click here), 21% in the majority of cases. Whenever you sell a product or a service to a customer, your fee includes part of taxes that you’ll have to give back to Hacienda —since that money isn’t really yours.

Besides, because of the nature of your activity, you’ll have expenses for which you’ll also pay a VAT fee, which will be balanced out by the one you charge your customers:

Due VAT = Output VAT — Input VAT

But be careful with…

Sales equalization tax

In some kinds of businesses, when you buy from your suppliers using the same tax rate you use for your customers —and you do not manipulate the product— the Treasury Department will automatically add an extra equivalence surcharge.

Tax Register Declaration and Heading Selection

When you first register your business, you’ll have to fill out the 036 and 037 forms, indicating in the latter the heading under which your commercial activity will operate.

In order to do so, in boxes 400, 402, and 403 you’ll select the type of activity, the section and IAE heading (Tax on Economic Activities).

In your case, because you’re just getting started, you’ll be exempt from IAE taxation, since it only applies to companies that pay the Impuesto de Sociedades because they handle over a billion euros every year.

Who knows? Maybe you’ll get there sometime… 😉

You can look up the list of commercial headings, but bear in mind it’s that updated according to the online world.

For Hacienda purposes, an eCommerce activity is defined by the nature of the services you provide. So, if you run a detox juice company, it’s no difference whether you sell online or not; your heading would be number 415 “Juices, fruit extracts, and others”.

Is it mandatory to register your business before the Treasury Department?

The answer is yes.

“The thing is, I’m barely getting started and I do not know how I’ll do”.

All the same… registering has no cost. If you’re going to be billing, you’ll be taking money that’s not yours and there’s a name for it: informal economy.

The Treasury Department and the Social Security Department are different bodies, and registering your activity in the former doesn’t mean you must register at one in the latter.*

*We’ll see this in depth in a moment because it’s a bit more complex than that.

Registering in the Social Security Department (or not)

In other words, this is to sign up in the special regime for self-employed workers (RETA).

Who is a self-employed worker?

A self-employed worker is someone who…

Regularly, personally and directly carries out a commercial activity to earn money, without a work contract.

“Regularly” means that they receive a regular income.

Is it mandatory to sign up as a self-employed worker when starting an eCommerce?

Here’s when it gets complicated.

If you’re just getting started and you only make some money every now and then, there’s no reason for you to sign up as such.

Well, according to the law you should. However, in 2007, the Supreme Court ruled in favor of a self-employed worker who made less than the official minimum wage. 

Since then, such precedent has made possible not registering in the Social Security when incomes are very low.

Watch out, though. A precedent is not the law… so you might face a fine if you decide not to.

To summarize

You have a margin of about €1,000 a month —the current equivalent to the Spanish official minimum wage (it is expected that by 2023 this figure increases to €1,049)

In case you don’t match such an amount, you can always leave it for later on when your situation is more stable. 

However, keep in mind this estimate is not 100% legal nor reliable, so you could still get a fine. If you have any doubts about your specific situation, it’s probably best to consult your agent.

In case you’re already near to receiving such income, be ready to start paying the monthly fee for self-employed workers.

How to register as a self-employed worker after doing so in Hacienda

Here you’ll want to be careful with dates.

You’ll have a one-month deadline after registering in Hacienda, so better get this done as soon as possible.

Even if you have 30 days to get it done, don’t put it off too much. Do it the same calendar month as the registration in Hacienda —best if within the first 5 days of the month.

If you miss this deadline and the Social Security Department notices you’ve been complying with your tax duties without having signed up as a self-employed worker, you’ll be charged for delayed payments. And, as a ‘reward’, you’ll get a 20% surcharge.

What should if I want to stop being a self-employed worker?

If you trusted that 2007 ruling and you have been billing small amounts without signing up in Hacienda, don’t even think of doing it now.

The right thing to do would be to deregister in Hacienda so that once you have the registered again, then you sign in the Social Security department.

If you do something else, the government administration will ask you for the monthly payments since you registered the first time in Hacienda.

How much is the monthly fee for self-employed workers?

In 2018, after many years, an Entrepreneurship law and a Self-Employment Promotion law were updated.

One of the most important changes, but not the only one, is the fee to pay.

  • A €60 fee for the first year: as of January 1, 2018, new registrations benefit from a year-round discount (it used to be only for 6 months). Currently, the minimum monthly fee is €60 (and it is expected to increase to €80 as of 2023), unless you have registered as a self-employed worker at any point in the previous 2 years or benefitted from the discounted fee during the previous 3 years.
  • €146,97 during the next 6 months: that is, the first month after the €60-fee is over, and for 6 months more. It’s a 50% discount off the regular fee.
  • €205,76 for another 6 months: until 2 years have passed since registration —with a 30% discount off the regular fee.

After that, the fee normally amounts to €293,94 per month*, but there are always bonuses for workers younger than 30, unemployed or disabled. 

And it doesn’t stop there. You’ll still need to fill out the 303 form for purchases and sales generated every trimester in Spain (and its European equivalent, form 349). And of course, you must also pay the IRPF tax by using form 130.

Once you’re in place with the Treasury Department and the Social Security Department, you’ll be over your first expenses, but you still have a long way to go to operate a 100% legal eCommerce.

Just keep reading.

*NOTE: as of 2023, a new segment-based tax contribution system will be in place, as established by the Royal Law Decree 13/2022, from July 26th. This system establishes up until 15 contribution segments that vary based on income.

If you’re in the first segments, the fee would be inferior to the current one. In return, self-employed workers with a high income will also have to face a higher fee. The Decree Law specifies how each segment works.

Laws and Requirements to start an online store

There aren’t many, but you definitely need to try and comply with norms.

Most of them are more or less related with user rights, so anything that translates into a stronger user experience will be positive for us too.

Cookies Laws

Cookies are small files that are saved in a user’s browser which allow you to track the movements they make on your website. Virtually every website uses cookies to run ads, engage in remarketing or simply obtain useful information provided by web analytics.

There’s a European regulation that forces notifying users about the use of cookies.

Fines for infringement vary from $600 to $600.000 in extreme cases, so it’s best to be strict about complying with the law. Fortunately, there are many plug-ins for WordPress or PrestaShop that will help us with this task.

The good news is that in a short while, this issue will no longer be something to worry about (at least in legal terms).

Third-party cookies will disappear.

Actually, big browsers such as Google Chrome, Firefox and Safari are already taking steps in this direction.

The idea is to replace this web analytics system for others that respect more users’ privacy (a growing concern).

In Doofinder’s blog, you can find a post on this topic, in which you’ll learn more about the impact of the removal of cookies for eCommerces and what alternatives there are. Read it here.

Electronic Marketing Laws (LSSI)

Another legal requirement to start your online store is to make the Privacy Policy available.

Marketing laws (see LSSI-CE) make certain information of your website more available to users.

These are things such as:

  • Your eCommerce’s general info (business name, place of business, business code number (or VAT number) business registration certificate, etc.).
  • E-mail or contact information for customers to get in touch with you.
  •  Your return policy.
  • Product warranty.
  • Your customers’ right to suspend or cancel their accounts just as to modifying terms of use.
  • Limitations and responsibility exemptions for any consequences derived from the marketing activity.

All this must be visible under the Terms of Use section of your web.

If you have any doubts as to how to write up your eCommerce terms of use, it’s best to contact a commercial lawyer who can advise you.

Retail trade law

In this section you should include the information of the products you offer and their purchase process:

  • Product features.
  • Price and shipping costs.
  • Payment methods.
  • Delivery time.
  • Right of withdrawal (for most products, customers have a 14-day window to return a product, it used to be 7 days only, but in 2014 they extended it until the current 14).

Now, let’s see another policy that will surely ring a bell… data protection regulation.

Data Protection Law (LOPD)

Another requirement for online selling is the registration of your customers’ data in the Spanish Data Protection Department.

In 2016, the General Regulation for Data Protection hardened European legislation on abusive data use by companies.

After its entry into force, the Spanish government announced a two-year deadline to comply with the law, which ended in 2018. The new Organic Law of Data Protection has been modified to comply with European regulations.

This way, any company, store or eCommerce that handles individuals’ data is compelled to specify:

  • Names.
  • Phone numbers.
  • IDs.
  • Emails.
  • Banking details.

Also, they must report all personal data from suppliers or employees.

You can use the NOTA form to register them. Just know that any time you store personal data, the customer must consent to it. The best thing here is to write up a section of your Privacy Policy and include a check box at the end of the website so they can keep browsing.

Email marketing and data protection

In online business, it’s usual to send out announcements or newsletters regularly.

It’s a tool that can be very useful, both for attracting more customers or to foster customer loyalty… except we overuse this tool and, instead of adding value, to constantly send out marketing emails non-stop.

The newest data protection law (LOPD) sets out to regulate this.

To begin with, it clarifies that in order to send the user information, they must provide their “free, specific and unequivocal” consent.

So far, this authorization was implicit when users consented to data submission. It’s surely been the case that simply by filling in your email for whatever reason has been you’ve started receiving ads from companies.

The new regulation also specifies that old databases must be reviewed to check what users authorized when being added to such database.

But this is not the only thing you need to take into account:

  • A visible unsubscribe button: users should be able to resign from receiving communications at any time.
  • Your suppliers should also observe this law: this includes anyone in possession of your customers’ data: email marketing tools, payment checkouts…. Will this affect Mailchimp?
  • 72-hour notification over any problem: if someone has tried to access customer data or you’ve had a data breech, you must report this to both your users and the Spanish Data Protection Agency.

In order to adapt your eCommerce to the new data protection law, there’s a free tool by the Spanish Data Protection Agency for you to assess whether you comply with standards. It’s called Facilita RGPD  and it won’t take you more than 20 minutes.

To summarize:

We believe these changes in data protection laws are very positive and will reward good, honest work.

In other words:

  • First, the user will drop their email on a form in your website (first opt-in).
  • Once this has happened, they’ll receive an email asking to confirm whether they want to receive your newsletter (second opt-in). To do this, they’ll only need to click on a link in the email.
  • Once they click, they’ll be officially a subscriber of yours. 😉

Well, even if users have confirmed time and time again that they want to be on your mailing list, use some common sense and try not to send only sales emails to your subscribers. You won’t be selling a lot more and you’ll worsen user experience.

So, are you legal?

So this was a review of the basic requirements to start your online store.

To be fair, looking up how to legally sell on the internet can be really annoying for those who are barely getting started with their eCommerce. However, it’s something everyone should learn about and be able to apply in the future for any online project.

Think of these requirements as your way to reach eCommerce success. Nobody said it was easy 🙂