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What is geoblocking and why is the geolocation of Ecommerce operations important?

What is geoblocking?

Geoblocking consists of blocking of certain services and products of the Internet based on the IP address of the person trying to access, based on the restrictions established by the authorities of the country or the selling company.

In practice, the world of the Internet is not as global as we might think a priori, since through geoblocking and using technological protection measures (TPM) access to locations that are not allowed is prevented, which represents a limitation to international electronic commerce. 

Geoblock origin

The origin of the geoblock may be depending on the pricing policy of companies applicable in the countries; For example, an identical air ticket in terms of route and category does not cost the same in one country or another.

In other cases the origin of the geoblock may be in the Copyright, where the owner of the rights does not have ownership in certain countries, this can, for example, happen with Netflix. 

Tools to bypass geoblocking

In Europe, the practice of geoblocking linked to ecommerce has been regulated since 2018 making geographical discrimination between EU countries impossible, This implied the homogeneity of offers, prices and conditions among all European consumers. There are some exceptions to this homogeneity such as, among others, health or financial services. 

There are tools to avoid geoblocking, through systems that prevent our IP address from being visible. 

  1. The VPN (Virtual Private Network ) one of the simplest ways to hide our real IP address. If we use a VPN, our computer or phone will connect to the location of the private VPN network to which we are connected. 
  2. The free open browser TOR Browser, which by encrypting the pages before leaving the Internet manages to hide the exit address and therefore evade geoblocks. Tor uses the Onion Routing technique 
  3. The Proxy, it is a computer service that acts as an intermediary between the connections of a client and a destination server, therefore a direct connection is not established and allowing access to pages by hiding or changing the real IP address from which it is accessed. There are some proxies that allow you to choose which country you want to appear to be browsing from.

Whatever mechanism is used to "mislead" about the real location of our IP, we must analyze the security of the mechanism, Because with some free ones we may be opening the door to hackers who can steal, violate or kidnap our information.

Geolocation of Ecommerce operations

The Sales will be taxed in the Member State where the supplier is established and in the Member State of arrival of the shipment where the final consumer is located depending on an economic threshold of the transaction.

It is important to determine the territory where the transaction is carried out to determine the subjective scope of application of the legislation, and this must be where the subject of the tax has his habitual residence or permanent domicile, and this determines the scope of application of the taxation system. 

The importance of determine the country well Taxation lies in the difference in VAT rates between the different EU countries, which range in general VAT from 17% in Luxembourg to 27% in Hungary.

What is geoblocking and why geolocation is important in ecommerce operations
Source: self made

The geolocation of Ecommerce operations will mark their taxation and administrative management; declaration and liquidation and therefore the possible sanctions of those who fail to comply with the obligations established by the EU and its member countries.

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