For EU customers buying high-priced products (e.g. sponsorships) I'd make sure to get their VAT ID so there's no tax.
For EU customers of lower priced products (like $20/mo subscriptions, etc), I would just pay the VAT myself. That way I could charge everyone exactly the same amount. For example, for a German customer where I'd need to charge 19% VAT, I would make $16.20 the base amount and $3.80 as tax.
Of course some customers would see it and say "hey I'm a business, I shouldn't have to pay tax!" in which case I would need to explain that I'd happily create a new invoice for them without any tax, but they'd be charged a $20 base amount. 😄
TLDR it's a mess, even if you try to simplify and eat the VAT yourself.
I haven't done extensive research on it because it's not relevant to me anymore. But one drawback I remember is that MOR's are always required to pay VAT, whereas if you'd take care of it through your own (smaller) business you might be exempt in some cases. So you'd end up paying more VAT.
There was some indie maker on Twitter with an axe to grind against MORs, but I forgot who. But he had a lot of interesting comments 😅
Sorry I know drawbacks about MoR, I plan to use Paddle. Just recently I was thinking of maybe establishing a company in Singapore and use plain Stripe... since I see many people go this direction.
Oh right. Yeah I would definitely check with your local tax advisor. You typically can’t simply incorporate in another country to minimize taxes while remain living and working in your current country.
I think you can register elsewhere just might need pay some taxes. I am not trying to pay 0% eu taxes I am trying to find a way from possible accounting hell :) You really moved out of EU?
Thanks! Can you share if you have a residency somewhere or not at all? Btw you can always own foreign companies, it would be a bit weird if you couldn't (from the point of my country preventing me owning something somewhere).
right, but if you charge 19% for a German then you also need to deliver that tax to the German tax authorities. as far as i know that holds true for every. single. EU. country. 😕
there is a case where you charge local VAT to other EU customers when value creation is local (e.g. analyse foreign lab sample domestically) but that does NOT work with digital services.
EDIT: just learned about the MOSS scheme making it pretty easy with digital goods. still you need a tax advisor for that, i guess.
Yeah I used MOSS to pay taxes to all EU countries in one go. Didn’t need a tax advisor for that. Maybe once to explain it but after you can do it yourself.
But eventually as your business grows you want to delegate all tax stuff anyway
I used to when I still ran a business in Europe.
For EU customers buying high-priced products (e.g. sponsorships) I'd make sure to get their VAT ID so there's no tax.
For EU customers of lower priced products (like $20/mo subscriptions, etc), I would just pay the VAT myself. That way I could charge everyone exactly the same amount. For example, for a German customer where I'd need to charge 19% VAT, I would make $16.20 the base amount and $3.80 as tax.
Of course some customers would see it and say "hey I'm a business, I shouldn't have to pay tax!" in which case I would need to explain that I'd happily create a new invoice for them without any tax, but they'd be charged a $20 base amount. 😄
TLDR it's a mess, even if you try to simplify and eat the VAT yourself.
Oh interesting idea, thanks for sharing. Yeah it's a mess. We need this to be better in EU :( where are you based now?
I moved business operations to Singapore
ever tried another solution?
I don’t think merchant of records were a thing then. But even if they were, I believe there’s some drawbacks to those too
Yeah, I think I would love to do the same. How did you researched it? Or did you hire some agency for that?
I haven't done extensive research on it because it's not relevant to me anymore. But one drawback I remember is that MOR's are always required to pay VAT, whereas if you'd take care of it through your own (smaller) business you might be exempt in some cases. So you'd end up paying more VAT.
There was some indie maker on Twitter with an axe to grind against MORs, but I forgot who. But he had a lot of interesting comments 😅
Sorry I know drawbacks about MoR, I plan to use Paddle. Just recently I was thinking of maybe establishing a company in Singapore and use plain Stripe... since I see many people go this direction.
Oh right. Yeah I would definitely check with your local tax advisor. You typically can’t simply incorporate in another country to minimize taxes while remain living and working in your current country.
I think you can register elsewhere just might need pay some taxes. I am not trying to pay 0% eu taxes I am trying to find a way from possible accounting hell :) You really moved out of EU?
Hmm I’m not sure it works that way. I really advice you to talk to tax advisor.
And yes I did give up my Dutch residency (not nationality). You’re required by law if you’re less than 183 days a year in the country.
Thanks! Can you share if you have a residency somewhere or not at all? Btw you can always own foreign companies, it would be a bit weird if you couldn't (from the point of my country preventing me owning something somewhere).
right, but if you charge 19% for a German then you also need to deliver that tax to the German tax authorities. as far as i know that holds true for every. single. EU. country. 😕
there is a case where you charge local VAT to other EU customers when value creation is local (e.g. analyse foreign lab sample domestically) but that does NOT work with digital services.
EDIT: just learned about the MOSS scheme making it pretty easy with digital goods. still you need a tax advisor for that, i guess.
Yeah I used MOSS to pay taxes to all EU countries in one go. Didn’t need a tax advisor for that. Maybe once to explain it but after you can do it yourself.
But eventually as your business grows you want to delegate all tax stuff anyway