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Comment by HugThem | Hacker News Reader

One thing I would love to know more about is how European SAAS startups handle invoicing and taxes. Afaik the tax situation in Europe is super complicated and you have to charge the tax of the country the customer is from.

I am in Europe and want to start a SAAS service that caters to individuals and small companies. I wonder if it is feasible to do so in Europe. Do I really have to ask each customer where he is based, if he is an individual or a company and then tax him accordingly? Do I have to create invoices?

US based startups seem to simply not care. Even big companies don't. They just ask for your credit card number and thats it. For example I used Amazon Mechanical Turk recently to outsource some work. And there simply is no way to get an invoice from them.

Do European startups have a big disadvantage in this regard or am I missing something?

Are there services that abstract that away? Deal with all the invoicing and tax issues?

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Running a Germany-based SaaS startup at some scale, so I feel confident to chime in.

To put it bluntly, you're right. We have to do more work just to get started accepting money than our American counterparts. Yes, the insanely complex EU-VAT rules actually need to be followed. Yes, a lot of your customers will want to pay via bank transfer and not through credit card. Yes, the American folks will still want to pay in USD and not in EUR.

We use ChargeBee (https://www.chargebee.com/) to abstract away most of the pain. I would greatly suggest using such a service (Recurly and Chargify are more enterprisey alternatives). We had a selfmade implementation before switching to ChargeBee, and one EU rule change caused us to have to re-issue all customer invoices for one quarter. Not fun. ChargeBee prevents you from doing the biggest blunders in taxation, and also allows you to keep track of invoices paid through credit card or through bank transfer (and specify the Dunning rules accordingly). Overall, I'd greatly recommend it.

Thanks for the info!

I tried your site and I saw that it adds the VAT when the user selects their country. Since the order page makes network requests to ChargBee, I guess they provide all that functionalilty.

Would you say ChargeBee is also a good solution for small one-time-payments?

When you say it abstracts away 'most of the pain' - what pain is left?

> Would you say ChargeBee is also a good solution for small one-time-payments?

My startup uses ChargeBee and deals with one-time-payments as well as subscriptions. It's definitely geared towards the subscription model, but you can make the one-off payments work by using the API and utilizing add-on products.

First, the customer would need to be signed up for a subscription plan that has a trial set to expire X years out (I think the maximum is 10). ChargeBee's pricing model is based on the total number of invoices per month (or at least that's how our plan works), so signing them up for a trial does not result in an invoice being generated.

Then you would set up an add-on product in ChargeBee that is of the "Quantity" type and has a price of $.01. When the customer makes a one-off purchase, you would call use the ChargeBee API to purchase a quantity of X of the add-on. So if the total charge is $10, you would use a quantity of 1,000 (1,000 x .01 = 10).

If you have products that have a set price, you can just add each one as an add-on and reference that product ID when calling the API.

It sounds kind of hack-ey, but I'm very happy with our decision to go with ChargeBee. Their customer support is awesome as well.

I think my sibling comment's experiences are somewhat dated. Running one-time payments has been absolutely no problem with ChargeBee for us. It's obviously geared toward subscription businesses, but it has full support for one-time charges as well. No need for any hacks or weird work-arounds.

Regarding what pain is left: I'm approaching this from an end-to-end perspective, so answering the question "Even when using ChargeBee, what additional work do we have to do compared to a similar business based in the US?":

- You still have to code in UI-level support for multiple currencies. ChargeBee handles the backend.

- ChargeBee gives you a nice UI for keeping track of paid and unpaid invoices. Nonetheless, for payments via bank transfer [which your EU business customers will want to use], you still have to manually confirm in ChargeBee that you've received payment.

- You still have to supply quarterly MOSS tax returns to your local tax authorities (though ChargeBee does all it can to make that process quick).

AFAIK there is no other work-around for one-time charges that have variable pricing. The $.01 quantity add-on is what's recommended by their support.

Have been using Chargebee for our B2C subscription product since December 2016, with plenty of European customers, and can heartily vouch for it.

Do ChargeBee publish their pricing? I can't seem to find anything concrete on their website, which is always a red flag for me :(

https://www.chargebee.com/pricing/

Free tier for new businesses, $99/mo and up (up up) nonlinearly.

We've been using Chargebee since the start of 2015. I found it after trying to figure out how we were going to deal with the EU VAT rules. At the time I couldn't find anyone else using it but we took a punt on it and I can say that it's probably our favourite bit of software in the business.

Beyond the subscription and invoicing side (in which they seem to have thought of everything) it also manages all our reconciliation in Xero. The payments come in to a holding account from Stripe in big transactions so you don't know which invoices should be mapped against the transactions. Chargebee have a chrome extension that will match everything up and automatically reconcile it all for you.

Also, the team have always been awesome to work with. Could not recommend them highly enough.

The tax stuff is a bit of a pain, but you can buy things (eg Stripe plugins) to make collecting the necessary data much smoother.

In short: If you're supplying digital services to consumers, you need to charge them Value-Added Tax (VAT) in the country they're in, not the country you're in. If you're supplying to businesses, you charge them VAT where you are. You need to collect certain evidence with each transaction, to prove which category/country your customer is in.

The search term you probably want is "VAT MOSS". This officially refers to the "Mini One-Stop Shop" provided by HMRC (the British tax authorities), which tries to ameliorate the situation. You still need to charge people the right amount of tax, but then you can just upload a quarterly spreadsheet saying how much revenue you got from each EU country. But "VAT MOSS" is also used as a catch-all term for the whole cross-border digital VAT kerfuffle.

It started out as a well-intentioned attempt to close a tax loophole, but it was clearly drafted by people with no understanding of how computers work. (There are actually "FAQs" about how, precisely, to handle a German citizen with a British SIM card making a mobile transaction from a train journey crossing the Italian-Swiss border...as if this were something a website could reasonably detect.) But, as I say, there are decent solutions you can use, and you just spend a couple of days implementing one of them.

But, as I say, there are decent solutions you can use, and you just spend a couple of days implementing one of them.

A couple of days seems very optimistic!

The situation today is certainly better than it was for those of us who got hit by the new rules before the payment services had caught up and had to do it all ourselves.

However, even the payment services today typically concentrate on adding the correct VAT rate onto initial purchases and possibly doing some sort of look-up to try to keep the required proof of location. They still won't do much to help you keep up to date with different tax rates for different types of service or in different territories, filing (and, if necessary, later re-filing) the MOSS returns themselves, knowing which location and therefore which tax rate to use for later payments after a customer starts an automatic recurring subscription of some kind, and so on.

And of course it's all relatively simple if you collect all your payments through the same payment method, such as Stripe and a plugin as you mentioned. If you're collecting through different channels then you're still going to have to reconcile all the figures yourself as well, at least with any payment systems I've ever seen.

> as if this were something a website could reasonably detect.

Do you not record your users' GPS, connection point, roundtrip delay, microphone, and camera at all times?

Because I stepped into a restaurant the other day and my brand new Android phone asked me to take a picture of the specific booth I had sat down in (by number and floor plan) for Google. Get with the modern analytics stack bro.

> ameliorate the situation

You could probably ameliorate that by changing it to "improve".

I intended the connotation of the word I used. It feels like the MOSS scheme's heart is in the right place, but the best they can do is make a bad situation suck a little less, and "ameliorate" is about as polite as I felt like being.

(While I'm making a new comment, and since the last one is out of its edit window, I should acknowledge I mangled my attempt to summarise the place-of-supply rules. Sorry. Don't get your tax advice from HN comments, kids.)

yes, it is much more complicated in Europe, but you can rent software that handles most of it (and you should).

If you cater to companies, it is easier. You ask for the VAT number and only if the company is from your own country, you add the VAT, otherwise its 0%.

If you cater to individuals, you need to use two different mechanisms to identify where the user is from (IP Address + Geo location and another one) and store this information, then you need to charge the VAT from that country and you need to signup for the EU Mini One Stop Shop (MoSS) with your local tax office, report your european VAT earnings quarterly.

Selling to a customer (business or individual) from outside the EU you can charge 0% VAT, so that is easy as well.

I recommend that you use either Recurly or Quaderno in combination with Stripe, because they generate the invoices for you and handle the VAT calculation perfectly.

I don't know about other countries than Germany (were we are located), but we also have to submit monthly VAT report to our tax office, all in all we pay our tax attorney 400-500 Euros per month, plus another 1000 for the yearly report. Maybe other EU countries allow startups to report quarterly or yearly? Idk.

Maybe other EU countries allow startups to report quarterly or yearly?

In the UK it's usually quarterly, but you have to file separate returns and make separate payments for VAT MOSS and domestic (UK) VAT, which might be out of phase unless your VAT quarters happen to fall on calendar quarters anyway.

> You ask for the VAT number and only if the company is from your own country, you add the VAT, otherwise its 0%.

No, it is not 0%, it is VAT deferred.

I think the correct term you are looking for is "zero rated".

I mean to help others with their Googling, I'm not trying to be overly pedantic :)

I appreciate you are trying to help but 0% vat is a totally different thing than deferred vat and if you would accidentally use the term 0% on your invoices rather than the correct term it would cost you dearly by the time you discovered your mistake (most likely during a tax audit).

I was incorrect in saying "zero rated" - the term I should have used was "out of scope".

B2B sales between EU nations are out of the scope of VAT in the supplier's country, and in scope in the customer's country (the customer must account for VAT using the reverse-charging rules)

EU SaaS founder here. It really is not as complicated as people are making it out to be, at least for digital services (I have no experience with physical products). Use a service like Quaderno https://quaderno.io for the invoicing, they plug into Stripe. Once you get that set up it's not a big issue.

Just because you are paying someone to do the complicated things does not mean it is not complicated. Also, $150 per month may be pennies to you but not for people in easter EU countries, or for a student trying to make a business. And that's only for 2500 invoices per month, what if you have thousands of tiny amounts?

> just because you are paying someone to do the complicated things does not mean it is not complicated

Of course, but that applies to everything, web hosting, email hosting, etc

> easter EU countries

Eastern

> what if you have thousands of tiny amounts

The card companies are eating your profit already in this case.

> but that applies to everything

irrelevant. EU doesn't have complicated email system, it has complicated tax systems compared to anywhere else in the world.

> card companies are eating your profit

Also irrelevant. they might be paying in raiblocks i d still have the same problem.

> EU doesn't have complicated email system, it has complicated tax systems compared to anywhere else in the world.

I'm glad you've shown your lack of knowledge here, VAT on digital services has some complexity, but overall taxation in the EU is simpler than what a lot of other countries require.

Oh dont get me started. It's impossible. I am an indie developer and want to sell virtual products to europeans. The easiest way to do it is to have an american company collect the payments and take a cut. Meanwhile, the EU is busy coming up with cookie laws. Thanks EU.

ps. here is a startup that is supposed to help companies with this minefield: http://taxdoo.com . We shouldnt need these things.

EU cookie laws might feel silly, but I’m really glad that EU politicians are erring on that end of the spectrum than taking the path the US has been walking with net neutrality and surveillance.

They don't feel silly, they are silly. It has literally just made the situation worse.

What's silly is people tacking in the cookie notice even for 99% of the times they are not needed

> Cookies clearly exempt from consent according to the EU advisory body on data protection- WP29pdf include:

> user‑input cookies (session-id) such as first‑party cookies to keep track of the user's input when filling online forms, shopping carts, etc., for the duration of a session or persistent cookies limited to a few hours in some cases authentication cookies, to identify the user once he has logged in, for the duration of a session > user‑centric security cookies, used to detect authentication abuses, for a limited persistent duration multimedia content player cookies, used to store technical data to play back video or audio content, for the duration of a session > load‑balancing cookies, for the duration of session

> user‑interface customisation cookies such as language or font preferences, for the duration of a session (or slightly longer) > third‑party social plug‑in content‑sharing cookies, for logged‑in members of a social network.

http://ec.europa.eu/ipg/basics/legal/cookies/index_en.htm

most sites have ads. those companies require it

Good catch.

Still, some cookie notices keep coming back even after you acknowledge them

That's the point. Ads harm the visitors of your website, so you should tell them they're being harmed.

Aren't the VAT requirements going in the exactly opposite direction then? Is it good for privacy that a bunch of different - and of questionable security - tax offices have to know who and where you were exactly when you purchased your sex toys?

C'mon man the cookie thing is a silly PR gesture, with measurable economic cost in the time it takes to dismiss all those dialogs in your tiny phone screen. It has done nothing, absolutely nada measurable in attitudes towards tracking.

The easiest thing to do from the accounting and complexity perspective is to use a reseller. We use paddle.com and are very happy with them. In such setup, reseller is selling your product/service and handles all the invoicing, per country tax calculation, etc. No matter how much you sell, you always get only a single invoice per month from the reseller, with only one entry - the cumulative sales from the month, which is very easy to account. If I understand correctly, Apple store also operates as a reseller (but Google Play doesn't).

The drawback is that customers see your reseller company name in invoices, which can be problematic for some, but we haven't yet hear complains.

Something that can help. Thanks.

> Afaik the tax situation in Europe is super complicated and you have to charge the tax of the country the customer is from.

What's the relational behind such a complex tax system? Sounds like a good way to discourage people from trying out business ideas.

The EU is...complicated: https://www.youtube.com/watch?v=O37yJBFRrfg

It's an improvement over the pre-EU situation, where every country was independent and shipping something 100 miles to a neighboring country would require customs declarations and tariffs and possibly complying with different labeling laws, assuming the countries weren't actually at war with each other at the time.

Tax authorities systematically underestimate how much they harm the economy through complexity.

The VAT MOSS scheme we're talking about (currently) only applies to digital services, not physical products. The problems you mentioned don't apply in this context.

There is absolutely nothing about this scheme that is better than before it was introduced. Nothing.

Several years after it was introduced, as others have noted, some of the payment handling services have kind of caught up, to the point where if you can use one of them then you'll probably fly under the radar.

You'll still have to spend time/money on the integration itself. You almost certainly still won't be fully compliant, because 100% compliance is practically impossible. You'll potentially be giving up a significant chunk of your margin in extra fees. And you'll still have the extra paperwork to do and the potential for an expensive audit by any of 28 member states' tax authorities if your number comes up. But at least you can carry on doing business in the meantime and hope for the best.

This tax scheme is my go-to example of what happens when politicians who see a problem but have no idea what they're doing try to fix the problem anyway. Your final sentence is right on point, sadly.

> There is absolutely nothing about this scheme that is better than before it was introduced. Nothing.

Under the previous scheme Luxembourg/Ireland would get a gigantic share of VAT. I guess you could argue that this money can be redirected by EU support programs to countries in need. I think that having the VAT go directly to the country closest to the buyer is a more optimal solution. Less dependence on EU welfare to know that your tax money is benefiting your community.

But that is already happening with regular taxes. EU allows apple and google to set up shop in Ire and do business throughout the EU. Why treat VAT so differently?

I think this was the aim of the scheme, but perhaps similar to the GDPR[0], it's hurting small businesses extremely disproportionately to larger ones...

[0] https://en.wikipedia.org/wiki/General_Data_Protection_Regula...

Wait, if i understand correctly, we would be charging 0% VAT to other european countries if we were pre- EU, right?

Yes, but your customer would need to pay the VAT at the point of bringing the goods to his country. As you can see, the pre-EU laws are a bit outdated.

Personally I find the sales tax system in the US much more complicated. At least in Europe the percentages are the same within each country, but in the US they differ per state, county and even per town.

At least in Europe the percentages are the same within each country

This isn't actually true. There are quite a few dependent territories and the like that are part of the same country but have different tax arrangements. There are also multiple VAT rates for different types of product or service in a lot of countries, with different rules from place to another about which products or services attract a lower rate.

Sure. The table can be found here[1]. But let's not pretend it's more complicated than it is, for a company that operates in a specific market, usually their products fall within the same VAT category. Unless you're Amazon or Bol that sells a range of products.

In the US you basically can be sure that sales-tax varies by zip-code. I worked for a telecom company in the US that sent all their invoices to a specialized company, to have them calculate the tax, before sending them out to their customers. It was too complicated to do that on their own. Also because tax rates can and do change at the whim of some local city-government for example. And as far as I know tax rates in the EU are determined by the country-governments only, which means not very often.

[1] https://ec.europa.eu/taxation_customs/sites/taxation/files/r...

You're right that many businesses will operate in specific markets, but even then it's still not always clear which rate should apply, and different classifications might apply in different member states or even different areas within the same member state. E-books were a controversial ambiguity when the new rules came in, for example. We could get more into how many technicalities there are in this system, but I think I'm just going to mention that the document you linked there is 116 pages long, which probably says all that needs to be said on that point.

As for locations, there are plenty of potential gotchas there too. Would you like to guess the rule if the person who bought an e-book did so while on holiday on a cruise ship in the Mediterranean?

And as for not changing very often, I think the shortest notice so far was just over a week from legislating the change to the new rate coming into effect (Greece in summer 2016). To this day, I'm aware of no standardised mechanism for alerting merchants to future changes in the relevant rates, nor any authoritative list of current rates available in a machine-readable format for automation purposes.

So while I agree that we shouldn't pretend it's more complicated than it is, the current EU VAT situation is a complete mess full of traps and technicalities to catch out the unwary, and full compliance is effectively impossible. It's a bad system, made by people who don't understand how either digital markets or small businesses actually work.

thats exactly what it is. And because small businesses can't lobby, nobody even acknowledges there's a problem.

Yeah you have to do all that you mentioned, and more. For example, with EU SaaS sales to individuals, it doesn't matter where the customer lives or what citizenship they have, what matters is where they are at the moment of the sale.

There is an endless supply of people who are willing to do this work for you, for a fee. Essentially this is the classic get an accountant advice.

You could also do all of this yourself if you consider yourself smart and limited on cash. Frankly it isn't that complicated to understand. There's plenty of information available online. In my case (Estonia) the local tax authority is even giving regular education classes for free that you can attend.

You could also do all of this yourself if you consider yourself smart and limited on cash. Frankly it isn't that complicated to understand.

The basic principle is easy enough to understand.

I doubt that there is a single person alive who fully understands the technicalities, and I doubt that there is a single person who worked on the scheme at the EU who understands why full compliance is essentially impossible for most if not all businesses.

A similar portion of the more general discussion yesterday:

Dear SaaS vendors | https://news.ycombinator.com/item?id=16180545

>dtech: As an European, my biggest wish for most SaaS vendors is an alternative to credit cards payments. SEPA Direct Debit

>throwaway2016a: Lack of PDF invoices

We’re B2C selling globally. We implemented VAT ourselves on top of Stripe. It’s a pain though. But it’s not only VAT MESS as they call it. At least in Germany tax is complicated and bureaucratic with freelancers and corporation tax rules.

If I could start fresh, I would probably set up a company in Singapore. Moving an existing business is FAR more complicated... There’s a pretty great post from the Ghost founder about it (on mobile so can’t look it up easily). Worth considering in my opinion.

There’s a pretty great post from the Ghost founder about it (on mobile so can’t look it up easily).

https://blog.ghost.org/moving-to-singapore/

>Afaik the tax situation in Europe is super complicated and you have to charge the tax of the country the customer is from.

This is why you have to keep in mind of possibility of setting up a fulfillment centre outside of EU economic area and countries with which EU has tax deals with, but on the border with it.

like?

Say Turkey. Turkey post is not as good as Finland's or Sweden'spost on delivery speed, but if you are frustrated with taxes, it should do the job.

It's a pro and a con. You have less european competition, because it's a hassle

Add to that the additional questions about accepting crypto currency payments.

do you know anything about it? I would like to tinker with something like that, but how does it work

You can just start selling and deal with the problems afterwards.

Not always a good idea when it comes to legal and tax issues. Some things can't be fixed later.

Never do that inside the EU unless you call being sued, paying huge fines and having your assets seized a solvable problem.

Yeah, you're right. Always have everything legal figured out before even starting your business, especially in the EU, no matter the cost. Good advice that everyone should follow.

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