SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

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SkyLinx
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Location: Espoo

SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by SkyLinx » Mon Jul 06, 2020 12:39 am

Hi everyone.

I'm working on a SaaS business and I am very confused about sales taxes/VAT. If I set up the company in Finland, but a customer subscribes from another country, which tax rate should I charge? Is it the Finnish 24% or the tax rate of the customer's country? And what if they are from outside the EU? Do I still need to charge them VAT?

I need to look for an accountant but I was hoping someone here could give some info since I am still in the planning phase.

Thanks!



SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

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DMC
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Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by DMC » Mon Jul 06, 2020 6:31 am

I don't know if there is anything about SaaS that might change things but normally:
- Customers in Finland are charged Finnish VAT
- Private customers in other EU countries are charged Finnish VAT
- Business customers in other EU countries who provide you with their VAT reg. no. are not charged VAT
- Business customers in other EU countries who do not provide a VAT no. are charged Finnish VAT
- Customers outside the EU are not charged VAT

Upphew
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Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by Upphew » Mon Jul 06, 2020 10:24 am

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FinlandGirl
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Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by FinlandGirl » Mon Jul 06, 2020 10:52 am

DMC wrote:
Mon Jul 06, 2020 6:31 am
- Private customers in other EU countries are charged Finnish VAT
Depends on how much revenue you make in that country.
DMC wrote:
Mon Jul 06, 2020 6:31 am
- Customers outside the EU are not charged VAT
What to charge private customers depends on the legislation in the country of the customer.

betelgeuse
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Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by betelgeuse » Mon Jul 06, 2020 11:26 am

FinlandGirl wrote:
Mon Jul 06, 2020 10:52 am
DMC wrote:
Mon Jul 06, 2020 6:31 am
- Private customers in other EU countries are charged Finnish VAT
Depends on how much revenue you make in that country.
It depends on total revenue – not per country.

"If a Finnish business sells telecommunications, broadcasting services, and electronically provided services to consumers who reside in other EU country, and the sales volume for this activity is maximally €10,000 – and the €10,000-threshold had not been exceeded the previous calendar year – the Finnish business is able to simply file and pay Finnish VAT on these sales. However, it is additionally required for this that the Finnish business does not have a fixed establishment in another EU country."

https://www.vero.fi/en/businesses-and-c ... ial_schem/

DMC
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Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by DMC » Mon Jul 06, 2020 11:54 am

FinlandGirl wrote:
Mon Jul 06, 2020 10:52 am
DMC wrote:
Mon Jul 06, 2020 6:31 am
- Private customers in other EU countries are charged Finnish VAT
Depends on how much revenue you make in that country.
I was not aware of that. It is good that I never had any private customers!
DMC wrote:
Mon Jul 06, 2020 6:31 am
- Customers outside the EU are not charged VAT
What to charge private customers depends on the legislation in the country of the customer.
I find that surprising. It means that Finnish companies need up-to-date knowledge of the taxation legislation in every country where their customers reside. That is quite a burden.

Can you give an example of a country which requires their residents to pay Finnish VAT? Why would any country do that?

Can you give an example of a country that requires Finnish companies to charge their residents their local VAT? How is this enforced? What should a Finnish company do with VAT collected for some other country?

FinlandGirl
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Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by FinlandGirl » Mon Jul 06, 2020 1:39 pm

DMC wrote:
Mon Jul 06, 2020 11:54 am
FinlandGirl wrote:
Mon Jul 06, 2020 10:52 am
DMC wrote:
Mon Jul 06, 2020 6:31 am
- Customers outside the EU are not charged VAT
What to charge private customers depends on the legislation in the country of the customer.
I find that surprising. It means that Finnish companies need up-to-date knowledge of the taxation legislation in every country where their customers reside. That is quite a burden.
A Finnish company has to charge their private Finnish customers Finnish VAT.
You are saying it would be quite a burden for a foreign company to charge Finnish VAT, and a foreign company should therefore be able to offer the same 20% cheaper by to not charging VAT?
DMC wrote:
Mon Jul 06, 2020 11:54 am
Can you give an example of a country that requires Finnish companies to charge their residents their local VAT?
In the US sales tax is at the state level.
If your SaaS customer is in California there is no sales tax, but for customers in New York or Texas sales tax applies.
DMC wrote:
Mon Jul 06, 2020 11:54 am
What should a Finnish company do with VAT collected for some other country?
If you collect sales tax from customers in Texas, you have to pay it to the state of Texas.

If you are doing business in Texas or Australia or China local law applies.
I wouldn't plan doing any business outside EU without asking an accountant or lawyer what regulations and taxation and tariffs might apply.

DMC
Posts: 1280
Joined: Thu Nov 16, 2006 9:17 am

Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by DMC » Mon Jul 06, 2020 3:25 pm

FinlandGirl wrote:
Mon Jul 06, 2020 1:39 pm
DMC wrote:
Mon Jul 06, 2020 11:54 am
FinlandGirl wrote:
Mon Jul 06, 2020 10:52 am



What to charge private customers depends on the legislation in the country of the customer.
I find that surprising. It means that Finnish companies need up-to-date knowledge of the taxation legislation in every country where their customers reside. That is quite a burden.
A Finnish company has to charge their private Finnish customers Finnish VAT.
Yes, of course. That is why I wrote "- Customers in Finland are charged Finnish VAT".

You are saying it would be quite a burden for a foreign company to charge Finnish VAT, and a foreign company should therefore be able to offer the same 20% cheaper by to not charging VAT?
No, not at all. I have not said anything about what taxes a foreign company should charge.
I am saying that it is quite a burden for Finnish companies to act as tax collectors for every non-EU country in the world.

If I order something online from, say, a Chinese company they do not charge me Finnish VAT. I pay their price and I am liable for any taxes due in Finland. That seems reasonable to me and by analogy I would expect a customer in, say, Afghanistan to be liable for any Afghanistan tax due on something they import from Finland. This way each party to the transaction is responsible for handling the taxes due in their own country. Much easier.

betelgeuse
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Joined: Thu Aug 29, 2013 1:24 am

Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by betelgeuse » Mon Jul 06, 2020 4:28 pm

DMC wrote:
Mon Jul 06, 2020 3:25 pm
If I order something online from, say, a Chinese company they do not charge me Finnish VAT. I pay their price and I am liable for any taxes due in Finland. That seems reasonable to me and by analogy I would expect a customer in, say, Afghanistan to be liable for any Afghanistan tax due on something they import from Finland. This way each party to the transaction is responsible for handling the taxes due in their own country. Much easier.
For goods the situation is simple since the taxes can be dealt with in customs. However, for, for example, electronic services there's no such point of tax collection. How the EU has approached this is that non-EU providers register for the non-Union scheme of MOSS.

"For the non-Union scheme, the taxable person (who has neither a business establishment, nor a fixed establishment in the EU[1]) can choose any Member State to be the Member State of identification. That Member State will allocate an individual VAT identification number to the taxable person (using the format EUxxxyyyyyz)."

https://ec.europa.eu/taxation_customs/b ... er-moss_en

In practise, it's another matter to what degree (and what tools they even have) EU authorities monitor non-Union entities who do not register.

FinlandGirl
Posts: 438
Joined: Sat Nov 09, 2019 10:43 am

Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by FinlandGirl » Mon Jul 06, 2020 6:35 pm

DMC wrote:
Mon Jul 06, 2020 3:25 pm
I am saying that it is quite a burden for Finnish companies to act as tax collectors for every non-EU country in the world.
If a company is doing business in a country, it has to follow the laws in this country.
A huge benefit of the common market in the EU is that that EU is like one country with one set of rules.

For a small business alone it would usually be a terrible idea to offer its goods or services in many countries.
International expansion is not easy or cheap.

betelgeuse
Posts: 3563
Joined: Thu Aug 29, 2013 1:24 am

Re: SaaS based in Finland, customers from anywhere in the world - question about VAT/sales tax

Post by betelgeuse » Mon Jul 06, 2020 9:38 pm

DMC wrote:
Mon Jul 06, 2020 3:25 pm
I am saying that it is quite a burden for Finnish companies to act as tax collectors for every non-EU country in the world.
There are workarounds. See, for example:

"A Merchant of Record (MoR) model may be the answer to your problems. A MoR acts as a reseller of your software, which means that each sale to an end customer is legally a concurrent sale from you to the MoR and from the MoR to the customer."

https://paddle.com/blog/global-sales-ta ... ationally/


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