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Stripe Tax question
I'm currently in the process of figuring out how to do bookkeeping for my Stripe transactions
My accountant asked if it was possible to charge a default 21% Dutch tax for some transactions where Stripe Tax shows 0%
Is this possible?
My accountant asked if it was possible to charge a default 21% Dutch tax for some transactions where Stripe Tax shows 0%
Is this possible?
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I don't use Stripe Tax, but when I was incorporated in the Netherlands I would just charge everyone the same amount (e.g. $100), and then retroactively decide what percentage was VAT.
So if the customer was in the Netherlands (e.g. based on their credit card country + IP address), I would do $100 / 1.21 = $82.64 as base price, and the remainder as VAT.
The one issue I ran into this, is that whenever someone would ask for a proper invoice, I'd need to generate it with the above calculation. I think Quaderno did this for me.
But then if the customer was a business in say Germany (where I'd take the same approach, but 19%), they might then later provide their VAT ID and ask for their paid VAT back. As technically they don't need to pay it.
I'd need to tell them that if they provided their VAT ID, the base price would be $100 again (and so they didn't gain anything). Bit hard to explain to people 😅
Where are you incorporated now? I'm having to think about this as I will have to start charing users for jobsinenglish.dk soon.
Judging by my invoice for WIP.co membership, it's incorporated in Singapore.
Singapore. Typically you want to incorporate where you do (most) of your work.
This is probably the right answer, confirmed by some online searches and opinions from other communities. The downside is (at least here in Spain) it is really bureaucratic and painful to be a small business.
Same in the Netherlands and I think the rest of Europe. It's one of the reasons I moved out.
I'm using Stripe Tax and Stripe Checkout, which calculates the tax and generates the invoices + receipts. It works nicely. Need to do a followup call with my accountant to discuss it further.
What's the reason he wants you to charge tax where Stripe Tax dictates zero?
I’m not sure we need to look into it together more, they have experience with other PSP but not Stripe yet
Stripe charges a fee for invoicing, you can use this tool instead zenvoice.io/
Thanks I’ll check it out
I did use Stripe Tax and invoicing.
Note that Stripe also allows configuring whether VAT is included in the price or not. In my case, I prefer to exclude it from the price.
This works nicely, but depending on your accountant, he will or you will struggle when reporting numbers since Stripe reports almost never directly include all the data that your accountant wants or needs.
On my side, I had to write a script to extract and classify data based on my accountant's needs. For instance, I have to know my revenue per country for customers with no VAT numbers (individuals) and the amount of VAT collected.
In the case of customers with a VAT number (companies), reverse charge applies, except for companies legally based in the same country as me (I am based in France). I need to know the total revenue for companies in the European Union, the total revenue for companies outside the European Union, and the total revenue for companies exempted from VAT by an express provision of the law. This last case happened to me only once when making a Stripe invoice to the OECD organization.
Then, things become a bit more complex when Stripe informs you that you need to register in some other countries, that you register and need to collect taxes for other countries. I guess your accountant will be happy to help.
Another issue for me was dealing with multiple currencies and conversions. Stripe takes a fee for the conversion but does not put it in the fee column in its reports. The Stripe fee for currency conversion is "transparently" included in the conversion rate, which does not match the market rate. More subtly, some reports use the conversion rate with the fee deducted while others use the conversion rate with the fee included! It took me a long time to understand why the numbers were not matching after some computations due to this.
Regarding whether to charge 21% when Stripe shows 0%, we most probably don't have enough context to really help, and, as suggested by others, the best is to consult with your accountant. However, Stripe Tax seems to work quite well and is used for millions of transactions, so I would first trust Stripe over your accountant without a very clear explanation.
Ok thank you for the long response! I might have to create some tools to get the right data for my accountant as well I think at some point.
@EddyVinck A very similar question was recently posted on Reddit and I am going to copy/paste my comment below. But please feel free to ask any questions. I am a CFO for an IT company and I worked with Stripe.
My comment:
Stripe can not handle tax. Stripe can barely compute tax. From their website:
Stripe Tax lets you calculate, collect, and report tax on global payments with a single integration. Know where to register, automatically collect the right amount of tax, and access the reports you need to file returns.
Believe me, I have been working as a CFO for several companies and a system that tells you where to register and give you the raw data to file YOURSELF your reports, is not what I call a system that handles my taxes!
If you want to seriously work globally, go with a MoR and forget about Stripe. Now Lemon Squeezy or Paddle, that's the big question. It seems that Lemon Squeezy is way more expensive for companies outside the US and working globally.
And your accountant is most certainly right but it is impossible to confirm without more information.
At best, if you are using Stripe Tax, Stripe will add taxes where YOU tell them to add taxes. So, if you haven't told Stripe to compute VAT on EU transactions, Stripe Tax will just show 0%.
When it comes to Sales Tax, Stripe can help you track the economic nexus per state, so you will know when you need to start adding sales tax to your invoices.
Anyway, if you are selling globally, Stripe is absolutely not the right tool, unless you have an army of tax accountants working for you. A Merchant of Record (MoR) costs more, but it saves you a ton of headaches in the long run!
Got a response from my accountant
For legal reasons etc I’ll say this is not financial advice and you should talk to a professional yourself
my accountant recommends charging 21% Dutch tax to only consumers from the EU until I hit 10k per year in revenue and pay my taxes in The Netherlands for those consumer customers. Once I hit 10k ARR then I’ll have to start paying tax in other EU countries themselves.
Just need to figure out how to charge a flat 21% to those EU consumer customers only.
@EddyVinck, you don't charge a flat 21% to all EU consumer customers. You apply the VAT rate based on their country (20% in France for instance). If they are businesses, they provide their VAT ID, so you don’t add VAT to their bill.
Both are true but given my circumstances charging 21% is easier here