One Latvian e-commerce business selling handmade ceramics hit €340,000 in revenue through Shopify, Etsy, and Amazon in 2025 — and filed VAT returns in zero foreign countries, thanks to the OSS mechanism. Ten years ago, the same business would have needed VAT registrations in up to 27 Member States. The rules have simplified. The accounting — not so much.
Running an online store from Latvia means reconciling payment processor reports that don't match bank statements, tracking inventory in warehouses across multiple countries, and calculating VAT at rates you don't set. E-commerce accounting differs fundamentally from standard SIA accounting — and that's precisely why so many online store owners encounter unpleasant surprises in their first years. This guide covers the accounting reality every Latvian e-commerce operator faces in 2026.
How E-Commerce Accounting Differs from Regular Accounting
For a classic SIA, the accounting process is relatively straightforward: issue an invoice, receive a payment, record the expenses. In e-commerce, this process becomes multi-layered.
First, your "customer" in accounting terms is thousands of anonymous buyers, each making a relatively small payment. You don't issue an invoice to each one — instead, you must rely on summary reports from platforms and payment processors.
Second, the money arriving in your account comes not from the customer, but from Shopify, Stripe, PayPal, or Amazon — after deducting commissions, payment processing fees, refunds, and held amounts. Your bank statement shows a net deposit, but your accounting must reflect the gross sale.
Third, VAT application is no longer simple: you need to know which country the buyer is in, what VAT rate applies there, whether you have exceeded the €10,000 cross-border B2C sales threshold, and whether you are using the OSS scheme.
Fourth, you must handle multi-currency transactions — euros, US dollars, British pounds — and the exchange rate fluctuations that affect your bottom line.
Multi-Platform Sales Reconciliation
Most Latvian e-commerce businesses sell through at least two channels — their own online store (Shopify, WooCommerce) and one or more marketplaces (Amazon, Etsy, eBay). The accounting challenge is not the selling — it is the reconciliation.
Shopify
Shopify pays out after deducting payment processing fees — typically 1.4% + €0.25 per transaction for European cards. Your bank statement shows a net deposit. But revenue must be recorded at the gross sale amount, with Shopify fees as a separate expense. If you record only the net deposit as revenue, you are under-reporting your turnover — and potentially under-declaring VAT.
WooCommerce and Payment Processors
WooCommerce together with Stripe or PayPal creates similar issues. Stripe pools payouts and deducts fees (typically 1.5% + €0.25 in Europe). PayPal holds funds, releases them on a schedule, and charges fees per transaction — up to 3.4% + €0.35 for an international payment.
Marketplaces (Amazon, Etsy, eBay)
Marketplace sellers face an additional layer: the marketplace itself may collect and remit VAT on your behalf. Since July 2021, platforms are "deemed suppliers" for goods valued under €150 sold to EU consumers. This means the platform, not you, accounts for the VAT on these transactions. However, in your accounting, you must still distinguish which transactions had VAT handled by the platform and which ones you need to account for yourself.
The Practical Reconciliation Routine
Export transaction-level data from each platform (Shopify, WooCommerce, Amazon Seller Central, Etsy) every month.
Reconcile gross sales, commissions, refunds, shipping fees, and VAT.
Compare platform reports with actual bank deposits.
Record gross revenue as sales, platform commissions as selling expenses, and payment processor fees as financial expenses.
OSS — The One-Stop Shop for EU VAT
One of the most important elements of e-commerce accounting is the OSS (One-Stop Shop) regime. This scheme has been operational in Latvia since 1 July 2021.
The €10,000 Threshold
Since July 2021, a single EU-wide distance B2C sales threshold has applied: €10,000 per calendar year, counting all EU Member States together. As long as you remain below this amount, you may charge Latvian VAT at 21% on all B2C transactions within the EU.
Once your total cross-border sales to private individuals exceed €10,000, you must apply the VAT rate of the customer's country. A shipment to France — 20% TVA; to Spain — 21% IVA; to Germany — 19% Umsatzsteuer. The rates differ, the rules vary.
Without the OSS simplification mechanism, you would need to register for VAT in every country you ship to. For a store with ten destination countries, that would mean ten registrations, ten sets of returns, ten sets of local rules. The administrative costs alone would destroy most small internet businesses.
How OSS Works
OSS allows a Latvian-registered VAT payer to file a single quarterly return covering all B2C transactions across the EU. Registration takes place through the VID EDS portal, takes around 15 minutes, and requires no separate number — your existing Latvian VAT number suffices.
In practice, it looks like this:
You sell goods to customers in France, Germany, and Italy.
You apply the VAT rate of each country (20%, 19%, 22%).
Once a quarter, you file a single OSS return through the Latvian VID.
VID forwards the corresponding VAT amounts to each country's tax authority.
Crucially: OSS does not replace local VAT registration. If you hold stock, maintain an office, or have any other form of permanent presence in another EU country, you may still need to register for VAT there separately. OSS only covers cross-border B2C sales.
OSS Filing Deadline
The OSS return must be filed by the last day of the month following the end of the quarter (April for Q1, July for Q2, October for Q3, January for Q4). If you miss the deadline, VID can block your access to the OSS scheme, and you may need to register for VAT in each individual Member State — returning you to exactly what OSS was designed to avoid.
IOSS — Importing from Non-EU Countries
The IOSS (Import One-Stop Shop) is a similar mechanism for goods imported from outside the EU valued at no more than €150. IOSS allows you to charge VAT at the point of sale rather than at the customs border, significantly simplifying the process for your customer.
IOSS is particularly important for dropshipping businesses that sell goods from China or other third countries directly to EU customers. Without IOSS, your customer will pay VAT at customs, along with a customs handling fee — a customer experience unlikely to encourage repeat purchases.
Multi-Currency Transactions — How to Record Them Correctly
E-commerce businesses rarely operate in a single currency. You sell in euros but pay suppliers in US dollars or British pounds. You hold accounts in multiple currencies with Stripe, PayPal, or Payoneer. Proper recording of currency transactions is vital.
The basic principle: all transactions in your accounting records must be reflected in euros. Conversion must be carried out at the European Central Bank exchange rate on the date of the transaction, or at the rate prevailing on the last day of the preceding month.
For example, if you receive 1,000 US dollars from Stripe and the ECB rate that day is €1 = $1.08, you record €925.93 in your accounts. If the exchange rate changes between the time you receive the dollars and the time you convert them to euros, the difference is reflected as an exchange rate gain or loss.
The most common mistake: businesses receive money into multi-currency accounts but only record the final euro amount after conversion, ignoring the intermediate step — the foreign currency account balance. In a VID audit, this approach can lead to significant discrepancies.
Returns and Refunds — The Accounting Treatment
Product returns in e-commerce are inevitable. The average return rate in e-commerce is 15–25%, and for fashion items it can reach 40%. Every return affects revenue, VAT, and inventory records.
Return accounting step by step:
The customer requests a return.
You approve the return and issue a refund.
In the books: gross sales revenue is reduced by the refunded amount.
VAT is adjusted — if the sale was made with VAT, the VAT portion is also returned.
Inventory is restored if the item is returned to sellable stock.
If you use OSS and sold with the VAT rates of other countries, the return VAT adjustment must be reflected in the relevant OSS return for that specific country.
Inventory Management and COGS
If you sell physical goods, you need to maintain inventory records — both in your Latvian warehouse and potentially in overseas warehouses (e.g. Amazon FBA centres).
Inventory valuation can be done using one of these methods:
FIFO (First In, First Out). The first goods purchased are treated as the first sold. The most commonly used method.
Weighted average cost. The average purchase cost of all units held in inventory.
Cost of goods sold (COGS) is one of the largest expense items for an e-commerce business. Incorrect COGS calculation can significantly distort profit figures.
Payment Processor Fees — How to Account for Them Correctly
Stripe, PayPal, Shopify Payments — each charges fees that must be correctly reflected in the accounting records. A common mistake is to record only the net deposit from Stripe as revenue. The correct approach:
Gross sale — the full amount before fees, recorded as revenue.
Payment processing fees — recorded as selling expenses or financial expenses.
This approach not only ensures correct VAT calculation (VAT is applied to the gross amount), but also provides a more accurate picture of the company's turnover and cost structure.
VAT Registration for E-Commerce Businesses
For e-commerce businesses, VAT registration may be mandatory for two reasons:
Domestic turnover exceeds €50,000 (the standard Latvian VAT threshold for established businesses).
The €10,000 EU-wide cross-border B2C sales threshold has been exceeded, and you register for OSS.
Important: OSS registration automatically makes you a VAT payer at the domestic level as well. You cannot use OSS without being a VAT payer in your Member State.
For foreign businesses selling goods to Latvian consumers through an online store, the VAT registration threshold does not apply — registration is generally required from the first taxable transaction, unless the OSS is used.
E-Invoicing in E-Commerce — What Changes in 2026
From 1 January 2026, mandatory e-invoice data reporting to the State Revenue Service (SRS) came into effect for all B2G and G2G transactions with budget institutions. E-invoices must comply with the PEPPOL BIS Billing 3.0 specification, and data must be in a structured XML format.
Although mandatory B2B e-invoicing has been postponed until 1 January 2028, e-commerce businesses should already consider voluntary e-invoicing adoption. The voluntary phase started on 30 March 2026, allowing companies to gradually adjust to the technical and procedural requirements.
E-commerce specifics: if you also sell to Latvian government entities (B2G), e-invoicing for these transactions is already mandatory.
Tax Planning for E-Commerce Businesses
E-commerce businesses can benefit from Latvia's tax advantages just like any SIA: 0% CIT on reinvested profit, the alternative CIT regime, and input VAT recovery.
Specific tips:
Using OSS avoids costly VAT registration in every EU country.
Correct COGS calculation directly affects your gross profit and thus the CIT base at the point of dividend distribution.
Separating platform fees from revenue reduces the VAT base — if fees are incorrectly included in revenue, VAT is paid on an amount you never actually received.
Frequently Asked Questions
Can I use OSS if my company is not a VAT payer?
No. To use OSS, your company must be registered as a VAT payer. OSS registration automatically makes you a VAT payer.
What happens if I cross the €10,000 threshold mid-year?
As soon as your total cross-border B2C sales exceed €10,000, you must start applying the customer's country VAT rate. If you are already registered for OSS, this transition happens automatically. If not, you must register as soon as possible — otherwise you are in breach of VAT rules.
How do I account for dropshipping transactions?
In dropshipping accounting, you must distinguish two levels: your sale to the customer (revenue) and your purchase from the supplier (cost). It is important to correctly determine the VAT treatment — are you an intermediary, or are you considered the main supplier? The answer depends on who is responsible for delivering the goods and ensuring their conformity.
Do Amazon FBA inventories trigger a requirement to register for VAT in other countries?
Yes, very likely. If your goods are stored in Amazon warehouses in other EU countries (e.g. Germany, Poland), this can trigger an obligation to register for VAT in those countries. OSS does not apply to situations where you have a permanent presence (including stock holding) in another Member State.
How long does it take to register for OSS in Latvia?
Registration for OSS through the VID EDS portal typically takes around 15 minutes, provided you are already a Latvian VAT payer. VID processes the registration within a few working days.
E-commerce accounting is not easy, but it is manageable once you understand the core principles and use the right tools. Our team specialises in serving e-commerce businesses — we help with reconciling Shopify, WooCommerce, and marketplace sales, administering OSS/IOSS VAT, and handling multi-currency accounting.
Last updated: May 2026. Information is based on the Latvian Value Added Tax Law, VID methodological materials on e-commerce, the EU e-commerce VAT package, and the gramatvedisriga.lv market overview.
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