Why e-commerce accounting goes wrong
An e-commerce business generates thousands of small transactions across several channels, each settling on its own cycle with its own deductions. A conventional bookkeeping approach — record what hits the bank — collapses all of that into a single net figure and discards everything useful about it.
What disappears: the actual gross revenue, the commission rate by channel, the true cost of payment processing, refund and return rates, and advertising spend deducted at source rather than invoiced. Each of those is an operating metric the business needs, and each is also required to get the VAT and corporate tax positions right.
Add cross-border sales, where place of supply determines VAT treatment, and overseas platform costs subject to the reverse charge, and this is a sector where generic bookkeeping does not produce usable numbers.
Who this is for
Businesses selling on Amazon, Noon and other marketplaces. Direct-to-consumer brands running their own storefronts. Businesses selling across both channels. Dropshippers and print-on-demand operations. Subscription commerce businesses.
Particularly businesses selling into multiple countries, businesses with substantial platform advertising spend, and businesses that have grown quickly enough that the numbers stopped being intuitive.
What the work involves
How we run it:
- Reconcile settlement reports to gross sales, channel by channel, recognising each deduction as the expense it actually is.
- Account for refunds, returns and chargebacks properly rather than as a net reduction in revenue.
- Track inventory across locations, including stock held in fulfilment centres you do not control.
- Establish place of supply for cross-border sales, which determines the VAT treatment.
- Apply the reverse charge on overseas platform fees, advertising, software and services.
- Calculate true unit economics — product cost, shipping, commission, payment processing, advertising, returns — per product rather than in aggregate.
- Prepare for e-invoicing, where customer data captured by a checkout not designed for it becomes a live problem.
- Handle corporate tax and VAT, including registration timing as the business scales.
What a settlement reconciliation actually produces
Doing this properly turns an unexplained bank deposit into a set of numbers the business can be run on:
- Gross sales — the actual revenue figure, which is also the figure that matters for the VAT registration threshold
- Commission by channel — the real rate, which frequently differs from the headline rate once category and fulfilment fees are included
- Payment processing — separated from commission rather than blended into it
- Advertising deducted at source — recognised as marketing spend rather than vanishing from revenue
- Refunds and returns — visible as a rate, which is an operating metric rather than an accounting entry
- Chargebacks and adjustments — identified rather than absorbed
- Fulfilment and storage fees — attributable to products, which is what makes unit economics possible
Until this exists, a business cannot answer the only question that matters in e-commerce: which products actually make money after everything is taken off. A great many sellers discover on doing it that their best-selling line is their least profitable.
VAT, place of supply and cross-border sales
Where the customer is determines the treatment, and e-commerce businesses cross borders casually in a way traditional retailers do not.
Sales to UAE customers are generally standard rated. Exports of goods outside the GCC implementing states are generally zero-rated, but only where export evidence is retained — and for small parcel shipments at volume, retaining that evidence requires a process rather than good intentions.
Digital services to overseas customers raise place-of-supply questions with their own rules. And selling into other countries can create obligations in those countries entirely separate from UAE VAT, which is outside the scope of a UAE return but very much within the scope of the business’s risk.
On the purchase side, almost every e-commerce business buys substantial services from abroad — platform fees, advertising, apps, freelancers — and the reverse charge applies to all of it. It is among the most consistently missed entries in this sector.
What goes wrong
These are the failures we are brought in to correct, in rough order of frequency:
- Recording marketplace deposits as revenue, which is the foundational error everything else follows from.
- Refunds netted against sales rather than recorded, hiding the return rate.
- Advertising deducted at source treated as lost revenue rather than as marketing spend.
- No inventory tracking for stock held in third-party fulfilment centres.
- Export evidence not retained on small parcel shipments, undermining zero-rating.
- No reverse charge on platform fees, advertising and overseas software.
- Unit economics calculated on product cost and price only, ignoring commission, fulfilment, advertising and returns.
- VAT threshold assessed on net deposits rather than on gross sales.
Timing and deadlines
Settlement reconciliation should be monthly. Reconstructing twelve months of marketplace settlements retrospectively is substantially harder than doing it as it happens, and platform reports are not always available indefinitely.
The VAT threshold should be monitored on gross sales monthly, because e-commerce businesses cross AED 375,000 of taxable supplies and imports over the previous 12 months, or expected within the next 30 days quickly and the test is rolling. E-invoicing preparation should start now — customer data collection through a checkout not designed for tax registration numbers is a months-long problem.
What you get
- Settlement reconciliation to gross sales, by channel, monthly
- True commission and processing rates by channel
- Refund and return rates visible as operating metrics
- Inventory tracked across all locations
- Unit economics per product after all costs
- VAT returns with correct place of supply and reverse charge treatment
- E-invoicing readiness assessment for customer data
- Corporate tax return and financial statements
Documents we will ask for
What we ask for up front:
- Settlement reports from every marketplace and payment gateway
- Sales data by channel and by product
- Inventory records including stock at fulfilment centres
- Purchase invoices and landed cost details
- Platform fee and advertising statements
- Details of overseas suppliers and subscriptions
- Sales split by customer country
- Current VAT registration status
Fees
Priced on channel count and transaction volume. E-commerce bookkeeping costs more than equivalent-revenue service business bookkeeping, because settlement reconciliation is genuinely more work than processing bank transactions — and it is the part that makes the numbers mean anything.
The initial setup, including channel mapping and unit economics build, is a one-off fixed fee.
Related
Frequently Asked Questions
Is the money from Amazon or Noon our revenue?
No. It is gross sales less commission, payment processing, refunds and advertising deducted at source. Recording the net deposit understates revenue, hides your cost base and produces a VAT return built on a figure that was never your turnover.
How do we work out our real margin?
By reconciling settlement reports to gross sales and attributing every deduction — commission, fulfilment, storage, payment processing, advertising, returns — to the products that generated them. A great many sellers discover on doing this that their best-selling line is their least profitable.
When do we need to register for VAT?
Once taxable supplies exceed AED 375,000 of taxable supplies and imports over the previous 12 months, or expected within the next 30 days over a rolling twelve months. Critically, that test is on gross sales, not on the net amount the platform remits — so businesses assessing against bank deposits register late.
Do we charge VAT on international sales?
It depends on place of supply. Exports of goods outside the GCC implementing states are generally zero-rated where export evidence is retained — and for small parcel shipments at volume, retaining that evidence requires a process. Sales into other countries can also create obligations there, separate from UAE VAT.
Do we owe VAT on Amazon or advertising fees?
Under the reverse charge, yes — you declare output tax on the purchase and, where entitled, recover the same as input tax. Platform fees, international advertising, apps and overseas freelancers all fall into it, and it is among the most consistently missed entries in this sector.
How do we account for stock in a fulfilment centre?
It is your inventory wherever it sits, and it belongs on your balance sheet. It needs tracking by location and reconciling to the platform’s inventory reports, because stock you cannot see is stock you cannot verify — and discrepancies between your records and the platform’s are common.
Will e-invoicing affect us?
Yes, and the customer data question is the hard part. A checkout designed to take payment was rarely designed to collect legal names matching trade licences and tax registration numbers. Collecting that across an existing customer base takes months, which is why it is worth starting well before your band’s go-live date.
If the answer is bank deposits, it is not your revenue. Send us one month of settlement reports and we will show you the difference.
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Last reviewed 27 July 2026. Rates, thresholds and deadlines change — the e-invoicing provider deadline has already moved once. Confirm current requirements with the Federal Tax Authority before acting, or ask us to check your position.