if you sell software to customers in the EU or UK, VAT applies regardless of where your company is based. a US LLC, Canadian corp, or any non-EU business has the same obligations and the same reclaim options. how it works depends on how you sell.
the basics
VAT is a consumption tax on sales. EU countries charge 15-27% (varies by country). UK charges 20%. as a non-EU company selling digital services, you owe VAT from the first sale - there's no minimum threshold. this is different from the US where you only collect after crossing a sales threshold (see nexus reference).
the key question: who collects the VAT from the customer and sends it to the tax office?
selling via Stripe
you are the merchant of record. you collect the full payment including VAT.
a German customer buys your €10/month plan. you charge them €11.90 (€10 + €1.90 at 19% DE VAT). Stripe deposits €11.90 into your account. you owe €1.90 to the German tax office.
what you need to do:
- register for VAT. for EU: register for OSS (One Stop Shop) in one EU country, covers all 27. for UK: register directly with HMRC.
- charge the correct VAT rate per country (Stripe Tax can automate this)
- file quarterly returns reporting what you collected
- pay the net VAT owed
the upside: because you file returns, you can offset input VAT (VAT you paid on your own purchases) against what you owe. more on this in the input credits guide.
selling via App Store
Apple is the merchant of record. Apple collects the payment, takes their 30% cut, handles VAT, and sends you your revenue share.
a German customer buys your €10 app. Apple charges them €10 (VAT-inclusive). Apple extracts the VAT portion, remits it to the German tax office, and sends you your cut. you never see the VAT, never report it, never file anything for it.
what you need to do: nothing. Apple handles everything.
the tradeoff: you can't offset input VAT against App Store sales on a quarterly return, because you don't file one for those sales. if you want to reclaim VAT on your purchases, you'd need a separate process (13th Directive refund - see input credits guide).
selling via both
most SaaS founders sell subscriptions via Stripe (web) and also have apps on the App Store. in this case:
- App Store sales: Apple handles VAT. nothing for you to do.
- Stripe sales: you handle VAT. register, collect, file quarterly returns.
- your purchases: input VAT offsets against Stripe output VAT on your quarterly return.
App Store revenue is invisible to your VAT return. it's a completely separate flow handled by Apple. your return only shows Stripe sales and your purchases.
registration
for Stripe sales, you need to register:
EU: register for OSS in one country (Ireland is common - English-speaking, straightforward). one registration covers all 27 EU countries. file one quarterly return.
UK: register with HMRC directly. £0 threshold for foreign companies selling digital services. file separate quarterly UK VAT returns.
both registrations are free. once registered, you collect VAT on Stripe sales and file quarterly.
when to care
- selling via Stripe to EU/UK customers → register immediately, you owe VAT from first sale
- selling only via App Store → Apple handles it, no action needed
- buying from EU suppliers → see input credits guide for reclaiming VAT on your purchases
related
- vat reference - terms, flow diagrams, mechanisms
- vat input credits - reclaiming VAT on purchases
- nexus reference - when you must collect tax (US thresholds vs EU/UK rules)