VAT for SaaS Companies

12 min read

VAT compliance for software companies selling into Europe is surprisingly complex. Here's what you need to know.

The Basic Rule

B2C: Charge VAT based on customer location. B2B: Reverse charge mechanism—customer handles VAT. Sounds simple, gets complicated fast.

Registration Thresholds

Each country has different thresholds for when you must register. Selling €10K to German consumers? You might need to register. The OSS (One-Stop-Shop) system simplifies this somewhat but doesn't eliminate complexity.

Practical Solutions

Merchant of record services (Paddle, FastSpring, Gumroad) handle VAT for you. They take a cut but eliminate compliance headaches. Worth it until you're doing serious European volume.

Record Keeping

You need two pieces of non-contradictory evidence of customer location. IP address + billing address is common. Keep records for 10 years. Yes, really.