VAT, invoices and registration — for first-time traders

The tax side of trading looks foggy mostly because it's explained in the language of legislation. Here it is in the words you actually think in.

An explainer, not advice. Thresholds and rates change — for your case, ask your accountant.

What VAT actually is

VAT is a consumption tax. You collect it from the customer and pass it to the state. It was never your revenue.

If you're registered:

• You charge VAT on your sales (output VAT)
• You deduct the VAT you paid your suppliers (input VAT)
• You remit the difference

That's the whole economics of it.

When registration is mandatory

When taxable turnover crosses a threshold over a defined period. The parts that matter to you:

• Turnover is tracked continuously, not at year end
• The filing deadline after crossing is short
• Being late is penalised, and can mean paying the tax for the missed period out of your own pocket

Practical tip: add a turnover column to your spreadsheet and look at it monthly. A shop having one unexpectedly good season can cross the threshold in weeks without noticing.

There are also cases of mandatory registration regardless of turnover — for example certain cross-border EU transactions, or receiving services from abroad. If you buy advertising from foreign platforms, this affects you, and it's the classic thing small traders miss.

When voluntary registration pays

The simple logic: registration helps you if your customers are registered too.

• Selling to businesses (B2B). Profitable. Your customer reclaims the VAT, so the price is the same for them, while you reclaim yours.
• Selling to consumers (B2C). Usually a loss. Either you raise prices and become more expensive than the competition, or you absorb the tax out of your margin.
• You have large VAT-bearing costs (stock, equipment, invoiced advertising). Here voluntary registration can be worth it even in B2C, if the input VAT is significant.

Do the maths once, with real numbers. Don't follow advice from a group chat.

Invoices: when and how

To a business — always.

To a consumer — on request. For an online shop the practical approach is to generate a document for every order automatically and email it.

What an invoice must contain to be valid:

• A sequential number (no gaps, no repeats)
• Date of issue
• Details of issuer and recipient
• Description of goods or services, quantity, unit price
• Taxable base and tax amount, if you're registered
• The reason no VAT is charged, if you're not

The most common small-trader mistakes: jumping numbering, a missing tax point date, and invoice text that doesn't match what was actually sold.

Storage

Accounting documents are kept for years, and electronic invoices are perfectly valid as long as they're unalterable. The practical solution: one cloud folder organised by month, plus a copy with your accountant. Don't rely on your inbox — it is not an archive.

How not to drown

1. Get an accountant before the first sale. Cheaper than the fine for a bad start.
2. Track turnover monthly in your own spreadsheet.
3. Automate invoices. Hand-issuing 40 a month is a guaranteed path to broken numbering.
4. Keep every purchase invoice — once registered, each one is money.
5. If you buy ads or software from abroad, tell your accountant explicitly.

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Taxes are not what will kill your business. A lack of customers is. But untidy taxes are the one thing that can kill a business that already works — so sort them once, early, while the volume is small.

Next step: declaring the shop and the audit file.