Engage a tax advisor to ensure state and Federal tax compliance.
Typical U.S. corporate tax calendar [in-process]State RegistrationsUS Tax ReturnsNon-U.S. Operations: Permanent Establishment
A permanent establishment (PE) is a fixed place of business that generally gives rise to income or value-added tax liability in a particular jurisdiction.
For a Delaware C-Corp, if key management teams and/or other key operations are located outside of the U.S., it may trigger tax reporting requirements in local countries (specific threshold / evaluation criteria depends on the local jurisdiction).
Discuss with your tax advisor on international tax law compliance and risk assessment.
Value Added Tax
VAT in UK and EU: Consumption Tax that is applied to all digital/physical goods and services. SaaS companies are to Charge VAT and are categorized as a TBE service according to the EU VAT and UK VAT categories.
To be in compliance with VAT the company needs to do the following items:
- Register your Business in EU (When selling to customers or business in EU)
- Verify your Customers (Obtain their VAT #, Billing Address, Customer Bank Location, Country of Credit Card, IP Address location of the Buyers Device if applicable etc.)
- Know when to Charge VAT – SaaS based companies always charge VAT when engaging in a B2C SaaS sale
- Retain Invoices
- Submit VAT Returns
Knowing when to Register: When using an invoicing platform, they do have monitoring mechanism to track sales if location of customers are correctly entered and maintained. Once the business is approaching a threshold a notification/warning is sent to the users. Note, even if you are NOT an EU based business, with a US or other location you may still be responsible for collecting VAT and remitting VAT returns.
Below are some high-level guidelines specifically for UK and EU VAT.
- IF you are an EU Business (Company is based in EU Country) selling only to customers/business in your home country register with the local tax authorities for a VAT registration.
- IF you are a non-EU Business selling to customers/business in one ore more EU countries register for a VAT MOSS (Mini One-Stop Shop) in the EU Country of your choice. They all work together for VAT applications.
- *NOTE: the UK VAT registration is separate from the EU VAT Registration. If you do business with customers/business in the UK, a separate registration and VAT return must be filed
When selling to customers/business request their VAT registration so you know and have proof that you know when and when not to charge VAT. For B2B sales you do not charge, for B2C sales you do charge. You can validate the VAT Registration portal on the VIES portal.
Sales Tax
Sales Tax in the United States and Canada is specific to each State/Province. Other Countries, such as South Africa, Australia, New Zealand etc. are at a country level. Each State/Province/Country has their own regulations, thresholds, and taxable items. Specifically for SaaS based sales a number of states in the United States consider these items to be a Nontaxable item. When utilizing a payment processing platform such as Stripe, the customer location you are selling to is important to capture and track correctly (generally the address of the customer). Stripe will add the sales transaction to the state/province/country where the data noted it was being sold and begin to monitor the thresholds or note it is a nontaxable. It is vitally important that the tax settings are monitored and set up is correct either within a platform such as Stripe or manually. Once thresholds are getting close to being met, registration in each state/province/country will be required and filings of sales and use tax in each individual state will begin to be required.