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Comment by jwr | Hacker News Reader

Consider yourself lucky and incorporate in the US.

Do not, under any circumstances, even think about running a SaaS business from Europe. EU has made invoicing hell for small businesses, especially those selling SaaS. You will spend time on things like VAT number checking, verifying customer's country using their IP (yes, I know), several kinds of invoices, prices inclusive or exclusive of VAT, calculating VAT for each EU country differently (and in different currencies), reporting VAT, and lots of other silly annoyances.

And if you think this is a "solved problem using a third-party service", you haven't tried it yet.

The only disadvantage of being US-based is that the first serious lawsuit will basicaly crater your business. Otherwise, you are way ahead of your buddies in Europe (like me).

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VAT is payed by the buyer. The percentage depends on the country where the buyer lives. The seller is required to collect the VAT from the buyer and pay that to the relevant country tax authorities.

The location of the seller is irrelevant for calculating, collecting and paying European VAT. Its applicably to any company in any country in the world.

However, for now having a company outside the EU does make it more difficult to be tracked by EU tax authorities. But its likely that at some point in the future that will change. And tax authorities fine easily.

If/when that happens, I would halt sales in EU on my niche SaaS. EU is a fraction of my user base and just wouldn't be worth all the hassle.

Please can you provide a link on these constraints in EU? Thanks

Search for "VAT MOSS", should be easy to find good resources.

Not to mention that MOSS is the 'simplified' way... if you don't comply you would actually have to register and file VAT in all countries separately.

Yes, this is a good pointer. However, there are likely more problems than just VAT MOSS — for example, it is likely that your home country will want you to charge VAT to your customers in the same country, while using VAT MOSS or reverse charge with customers in other EU countries. The result is that your subscription plan pricing gets significantly more complex.

Some countries also have requirements as to invoice language, or conversion rates that you need to use for foreign currencies. In my case (Poland), I can use the European Central Bank (ECB) rates for VAT, but not for income tax further down the line, so I have to integrated with two central banks to get their rates.

Overall, there is lots of overhead. There is a disconnect between EU officials and small modern companies. Officials want to "promote innovation and entrepreneurship" while introducing heavy-handed legislation (really meant to hurt Amazon, in case of VAT MOSS).

> verifying customer's country using their IP

If you use direct debit (which is also cheaper), isn't this taken care of for you are charging their bank account directly?

From memory, I think you need to capture 2-3 different location 'proofs', of which IP address is typically one

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