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Software Sales Tax in the European Union 🇪🇺

How do I solve my tax liability?
Agony Rating
Sales Tax Rate
Taxable Goods
Highest Penalty

How likely am I to get caught for owing sales tax in European Union?

Very likely, if you’re a B2C business and your sales into the EU exceed €10,000. For B2B businesses it’s less likely although you’ll need to complete a separate filing to report your VAT-registered customers and the sales volumes for each of them.

What is the sales tax threshold in European Union?

Sales into the EU exceeding €10,000 in a 12 month period.

Is SaaS taxable in European Union?

Yes. You owe tax for the sale of cloud software subscriptions to customers in European Union.

Are software downloads taxable in European Union?

Yes. You owe tax for the sale of software downloads to customers in European Union.

Are eBooks taxable in European Union?

Yes. You owe tax for the sale of eBooks to customers in European Union.

Are digital downloads taxable in European Union?

Yes. You owe tax for the sale of digital downloads to customers in European Union.

Registering for VAT in the European Union

😐🌶️ It's not that complicated

VAT in the European Union works under a system called VAT MOSS. 

For businesses based in the EU, you’ll need to register for VAT MOSS if your sales exceed €10,000 in a 12 month period. For businesses based outside of the EU, a “non-union VAT MOSS” system is one of the simplest and most commonly used options to be EU VAT compliant as the registration, filing and remittance processes are very similar to the EU version.

Filing & Remittance of VAT in the European Union

😐🌶️ It's not that complicated

Filing Frequency: Variable (by member state)

The rate of tax charged under VAT MOSS is the rate charged by the country where the customer is based, rather than the company making the sale. While this means you have to file and remit taxes for every member state you sell into, the ‘one-stop-shop’ system is actually quite straight forward. 

For B2C businesses, you can submit your filings to each member state in one upload. However, if any of your customers are businesses, you’ll need to complete a separate filing called the EC Sales List. This is to document all of your sales to VAT-registered customers so that you can report all the B2B sales in one go. 

Preparing this data correctly is a manual and lengthy process that involves verifying the VAT number associated with every sale.

Penalties for VAT non-compliance in the European Union

😬🌶️🌶️ It's very high / punitive

Penalties for non-compliance with VAT regulations in the EU vary by member state and range from back payment of taxes, to added interest and additional fines.

Things get more difficult if you’re late or fail to submit your returns for three consecutive quarters, as you can be excluded from the VAT MOSS scheme altogether. If this happens, you’ll need to register in all of the member states you sell to, individually.

Had enough yet? There's more…

🇪🇺 European Union tax jurisdictions

Tax jurisdiction
Sales tax rate
Taxable goods
Admin agony
Worst penalty
Total tax agony rating
How do I solve my tax liability? Load More +

How to become sales tax compliant globally 🗺

Three Routes to Compliance for SaaS Executives

SaaS executives have a choice of three routes to global tax compliance. Get the guide to walk through the options for your team.

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Don't Worry, Ask Hugo

As CFO of Paddle, Hugo's finance team manages global tax compliance for $100M's of ARR from over 2,000 software businesses. Ask your questions in our live webinar.

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How can Paddle help?

Paddle can take all your responsibility & liability for sales tax off-your hands. Our global entities, finance team, and $160k+ year spend on agents, tooling, and accountants is ready for you.

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