Etsy is one of the most accessible platforms for starting a global business. Whether you are just setting up your first store or you already have realized sales, at some point you inevitably face the question: “How do I legalize my activity and what taxes do I have to pay?”.
The answer to this question is not universal. For the National Revenue Agency (NRA), there is a huge difference in what exactly you are selling. The tax authorities treat trading in physical items and selling digital files in a completely different way.
Here is a detailed guide that will help you choose the right legal form in 2026 depending on your products.
Selling Digital Products (Printables, Planners, Designs)
If you create digital files – such as PDF reading journals, digital habit trackers, social media templates, or vector graphics – you are essentially selling a license (copyright) to use your work, not a physical object.
This is a huge plus from a tax perspective.
- Suitable legal form (Freelance Profession): This is the ideal and easiest option for you. Registering as a freelancer is fast, and the maintenance is cheap.
- Tax deductions (Statutory recognized expenses): When you sell copyrighted digital products, the state gives you the right to deduct 40% of your revenue as “creation expenses” without having to keep invoices for them. Tax and social security are calculated only on the remaining 60%. If you want to understand in detail how this is calculated, read Mixed royalties: Tax and social security reliefs for authors.
- Mandatory VAT (Art. 97a): Here is the biggest trap for beginners. Even if you have sold only one digital file for 3 euros, you are using Etsy’s services. The platform charges a fee for every sale you make and issues an invoice from Ireland. According to the law, when you receive a service from a foreign company in the EU, you must register for VAT (under Art. 97a) at least 7 days before your first sale. This registration does not make you a VAT payer for all your sales, but only for the fees that Etsy charges you. See how the mechanism works in What Does Reverse VAT Charging Mean?.
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Selling Physical Goods (Jewelry, Clothes, Printed Materials)
If you make physical items – for example, hand-bound planners in A6 format, candles, jewelry, or clothes – and mail them to your customers, the law generally views you as a classic merchant.
- Suitable legal form (EOOD): When you buy raw materials (thick paper, mechanisms, beads) to create a product and sell it for a profit, you are carrying out commercial activity. The freelance profession is not suitable for this, except in the rare cases when you meet the strict conditions for a craftsman.
- Taxes and real expenses: As an EOOD (Ltd.), you pay a 10% corporate tax on your actual profit (Revenue minus Expenses) and another 5% dividend tax when you decide to take the money for yourself. The advantage here is that you can deduct all your actual expenses – production materials, shipping fees, packaging, advertising. For a detailed comparison of the two forms, read Advantages and Disadvantages of an EOOD (Ltd.) and Freelancing.
- VAT for physical goods: Unlike digital products, here you track your turnover for standard VAT registration. In 2026, the thresholds have been changed, so it is important to be informed. Learn more from When to Register for VAT? New Thresholds and Business Advantages in the Eurozone.
The most frequently asked question: Do I need a cash register?
This is the big relief for everyone selling on Etsy. The platform uses the Etsy Payments system. This means the customer pays Etsy (with a card, PayPal, Apple Pay), and then Etsy transfers the accumulated amount directly to your bank account.
Since the money comes to you exclusively via bank transfer (IBAN to IBAN), you do not need a cash register, regardless of whether you sell digital or physical goods and regardless of whether you are an EOOD or a freelancer.
Summary
The choice of the right form depends on the nature of your work.
- If you create designs once and sell them thousands of times as a file, without dealing with logistics – register as a freelancer.
- If you have inventory, buy materials, and regularly send packages by mail or courier – you will most likely need an EOOD to manage your expenses effectively and protect your personal assets.
In both cases, partnering with a good accountant from the very beginning will save you a lot of headaches and potential fines from the NRA.
