I am in the UK and am in the process of setting up a SaaS product which people will be able to purchase online by monthly subscription.
I have been researching the VAT rules for supply of electronic goods to countries other than the UK and unless I'm reading them incorrectly, the rules seem absurdly complicated!
For example, it seems that the rules are different depending upon whether my customer will be using it for business or personal use (how will I know!?) and what country they're in. If they're in an EU member state then I need to charge VAT at their rate, not the UK rate, etc, etc, etc.
To be honest, I could do without these complications! Are there any legal ways of simplifying this? Would offshoring help? Would it be enough to host the service from a server in the US (or something)!?
I have no problem with the concept of paying tax (to an extent), but I also want to keep my application as simple to run and use (with a simple pricing structure and sign-up process for my clients) as possible.
For example, it seems that the rules are different depending upon whether my customer will be using it for business or personal use (how will I know!?) and what country they're in. If they're in an EU member state then I need to charge VAT at their rate, not the UK rate, etc, etc, etc.Yes, that is correct. The part of the customer using it for personal or business use is easy, if they provide a VAT ID, it's business... otherwise you consider it for personal use.
There is no way to avoid this... that's why big companies opened an European branch in Ireland or Luxembourg. Even if you incorporated your business outside the EU (in USA for example) and your client resides in the EU, you should charge VAT (I know there are a bunch of US businesses that don't do that but all big players do).
As long as your client is inside the EU, there is no way out. If you client lives in a country that doesn't belong to the EU, he will be exempt.
Some links that may help:
http://www.eurovat.com/faq.htm http://en.wikipedia.org/wiki/Taxation_of_Digital_Goods, check "Overview of Internet Taxation in the European Union"
Hope it helps.
I run a company in the UK that sells on-line services to customers in the EU. I know your question is a bit old, but when I found it, I thought I might have been wrong and decided to make some research on VAT when selling services throughout the EU. I presume you already might have some experience in this topic, but anyway... The rules are actually not that complicated.
Here you can find more information:
http://ec.europa.eu/taxation_customs/taxation/vat/how_vat_works/vat_on_services/index_en.htm And an interesting article on VAT between the UK and Poland (but you can apply the very same rules to any other country in the EU): http://www.brighton-accountants.com/blog/vat-uk-poland/ ADDED ON 28.03.2012:
I just want to add that I called the Ministry of Finance in my home country (Poland), and confirmed that the information above is correct.