Having a startup in the US is a huge mess due to all the states and taxes, if Europe can make everything digital AND easier, it's a no brainer for us to move our company there.
There are many companies that deal with this complexity for you. Online payment processors and e-store services for instance. Source: I have an US company, sell products to all states and don't deal with this.
I think you're the first person I've ever seen in my life saying "I moved my company from the US to the EU and now my business owner life is so much easier"...
> Having a startup in the US is a huge mess due to all the states and taxes
Not really, there are services like Avalara that give you the exact tax amount you need to collect from your customers once they fill in the shipping address.
> Having a startup in the US is a huge mess due to all the states and taxes
Not really there are literally companies as a service that take care of everything for next to nothing. It's actually kinda crazy how you can be up and running in under a week in the USA.
>>Having a startup in the US is a huge mess due to all the states and taxes,
In EU you will need to deal with VAT basically from day one (10k EUR of revenue). In US you will not deal with it until you can afford it as thresholds are very generous.
If dealing with VAT is a large problem for your business today, running a business might just not be for you, it's very trivial today to get it right and there are even platforms who basically does all the "hard" work for you. But even without those 3rd party solutions, I think the complexity is vastly oversold, it's relatively easy to get right compared to other regulations. Maybe I'm just EU-damaged already though, YMMV.
>>If dealing with VAT is a large problem for your business today
It's not a problem for me today. It was a big problem when I had no revenue, needed to do all the paperwork, meet ridiculous local accounting requirements connected to selling software in a different currency than my local one, write code, setup licensing, shipping the software to the clients etc.
It was a major source of stress and sleepless nights for me.
>>But even without those 3rd party solutions, I think the complexity is vastly oversold, it's relatively easy to get right compared to other regulations. Maybe I'm just EU-damaged already though, YMMV.
It's easy when you have done it once and know the process.
It's not so easy when you need to understand if your product meets a definition of an electronic service or something else, when accountants you are meeting don't know how to setup VAT-MOSS thing because it's still rare or when you need to add your tax authority about something and their reply is that they don't know so you need to write an official inquire (that requires a lawyer) so you can get your answer in a few months.
When I was setting a new company in another country it was easier for me because I already knew how the process work and I could hire a competent accountant before the new company had any revenue. It wasn't so simple when I had 0 capital and just wanted to ship software to see if people want to buy it.
> It's not a problem for me today. It was a big problem when I had no revenue, needed to do all the paperwork, meet ridiculous local accounting requirements connected to selling software in a different currency than my local one, write code, setup licensing, shipping the software to the clients etc.
Since this depends mostly on what country you are in/you are setting up the country in, what specific country was this? Because it's not the same everywhere, and by the sounds of it, is a lot more complicated than most other EU countries. Germany is famously bureaucratic, as just one example, and differs wildly from the type of experience you'll have in Sweden.
> It wasn't so simple when I had 0 capital and just wanted to ship software to see if people want to buy it.
Most people, accountants or not, won't tell you this, but you're usually fine starting to charge people and running a business "unofficially" for a couple of months without having to pay any fines or anything when you finally "regularize" your situation. Many accountants have dealt with this sort of setup countless of times too. But again, people won't advice you to take this route, but it is one option if you just wanna ship software and see if people want to buy it. If no one buys it, just don't tell anyone :) Unless you're doing five figures or more in revenue, no one will mind.
For me it's very stressful to not comply with the regulation on purpose hoping I am too small to not get punished by the authority. It would be easier to just ignore the regulation.
I get this makes me not well predisposed to do business in EU. Thank you for your advice.
> It would be easier to just ignore the regulation.
Well, in your case, completely ignoring something rather than doing it later sounds like it would be more stressful for you, if the problem is not complying? I'm don't think wanting to comply with regulation makes you "not well predisposed to do business in EU" and I'm not sure where you get that from.
Hence most countries has a threshold for when you need to charge the country-specific VAT and let you use the local one until you reach there. It differs by the country as far as I know.
But there is no threshold for cross-border selling in the EU.
Fine if you're selling widgets at a market in Germany - but if you sell software abroad, make sure you're following [each] one of the 27 VAT codes correctly.
(From what I understand - would love this to be wrong)
Following US sales tax has way more complexity. In my county alone there are many different rates depending on the city in which the sale is made. Even just finding out authoritatively which jurisdiction to pay taxes to is nontrivial, practically impossible to solve without dedicated software.
> Fine if you're selling widgets at a market in Germany - but if you sell software abroad, make sure you're following [each] one of the 27 VAT codes correctly.
Yes.
> But there is no threshold for cross-border selling in the EU.
Kinda, but misinterprets the VAT itself.
Basically, VAT is paid at the point of sale and local thresholds apply.
>>Basically, VAT is paid at the point of sale and local thresholds apply.
The threshold is 10k EUR (total sales to EU). The point of sale in case of software/electronic services is the country of residence of your customer.
You need to collect two pieces evidence of that location, usually billing address and IP. If those don't match (your customer has used a VPN for example) you need a 3rd piece.
One Stop Shop helps with it (when I was starting my company it didn't exist and predecessor VAT MOSS was just being introduced and no one knew how to comply with it) but you still need to charge local VAT rates and report quarterly.
You can just use a service for that if you find that too much work to do yourself. There are MoR services that do that for you for EU, AU, US states where it is required etc. It is more that most people outside the EU find it bullshit and just don't do it and complain about it anyway.
