US LLC VAT obligations

[Cari]

Hi! For US LLC that is providing services to the clients in EU (both B2B and B2C) what are the obligations in regards to VAT?
Any recommendations of the accounting platforms that keep track of VAT + help submit the reports (if needed) are also much appreciated. If you know a good EU based accountant who can help with that, would be helpful as well.

 

[Marzio]

You should check this out Cross-border VAT rates in Europe - Your Europe

 

[Cari]

Marzio said:
You should check this out Cross-border VAT rates in Europe - Your Europe
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It says the rules for the business based in the EU. However the company is based in the US, just selling services to the EU.

 

[Marzio]

Evi said:
It says the rules for the business based in the EU
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Have you ever seen an invoice from any US company that charges VAT when selling services to EU customers?

 

[Don]

Marzio said:
Have you ever seen an invoice from any US company that charges VAT when selling services to EU customers?
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There is indeed a widespread tax avoidance that will very soon be put to an end, with the combination of CRS reciprocal reporting and EU tax reforms, e.g., 100k threshold that would apply across the whole EU.

Heres an overview of the upcoming reforms:
https://www.vatcalc.com/eu/eu-2025-vat-registration-thresholds-equivalence-for-foreign-businesses/
Examples of tax obligations in different cases:
https://taxation-customs.ec.europa.eu/where-tax_en

 

[Marzio]

Don said:
There is indeed a widespread tax avoidance
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In case of B2B customers, the customer will account for VAT under the reverse charge mechanism.

In case of B2C customers VAT is charged at supplier's place of establishment and since supplier's place of establishment is outside EU, no VAT is charged.

This is how I understand it.

 

[ShillGates]

Marzio said:
In case of B2B customers, the customer will account for VAT under the reverse charge mechanism.

In case of B2C customers VAT is charged at supplier's place of establishment and since supplier's place of establishment is outside EU, no VAT is charged.

This is how I understand it.
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wrong b2c is where customer is regardless where that business is established. So german business selling b2c to france = french vat. USA llc selling to france is french vat as well

otherwise non eu business are more competitive then since they can sell it for cheaper

 

[Don]

ShillGates said:
wrong b2c is where customer is regardless where that business is established. So german business selling b2c to france = french vat. USA llc selling to france is french vat as well

otherwise non eu business are more competitive then since they can sell it for cheaper
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likewise EU company will not add VAT if the client is outside EU

B2C services like advertising services, services of consultants and lawyers, financial services,telecommunications services, broadcasting services and electronically supplied services are taxed at the place where the customer is established provided the customer is established in a non-EU country [Article 59 of the VAT Directive].
Example 47: When a Hungarian company sells an anti-virus programme to be downloaded through its website to private individuals residing in Australia, there will be no VAT due in Hungary.
Example 48: Services rendered by a Belgian lawyer to a US professor will not be subject to VAT in Belgium.

the above source is from:
https://taxation-customs.ec.europa.eu/where-tax_en

 

[Marzio]

ShillGates said:
wrong b2c is where customer is regardless where that business is established
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Well so you should email the folks at Europa.eu site and tell them that they are wrong.

You are talking about electronically supplied services but not all services are eletronically supplied services.

 

[saintjohnny]

Marzio said:
In case of B2B customers, the customer will account for VAT under the reverse charge mechanism.

In case of B2C customers VAT is charged at supplier's place of establishment and since supplier's place of establishment is outside EU, no VAT is charged.

This is how I understand it.
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Yep... this is how it works.

Marzio said:
You are talking about electronically supplied services but not all services are eletronically supplied services.

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Exactly. Spotify, Netflix, etc. are B2C electronically supplied services. Not B2B.

Example: A US LLC providing consulting services to a corporation in Germany. In this case, the German company should 'charges itself' VAT using the reverse charge mechanism. They can later deduct this VAT.

Last edited: Oct 25, 2023

 

[CyprusLawyer101]

The type of services you provide play a role in the VAT treatment.

 

[Cari]

the company is providing the consultancy services to EU-based clients. In case of B2C, can you suggest any platforms/accountant who would be able to help tracking the obligations and submitting everything correctly?

 

[Marzio]

Evi said:
The company is providing the consultancy services
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If you provide consulting why are you looking for an accountant?

Consultancy is human rendered service, not electronic hence no VAT.

 

[Gediminas]

Evi said:
Hi! For US LLC that is providing services to the clients in EU (both B2B and B2C) what are the obligations in regards to VAT?
Any recommendations of the accounting platforms that keep track of VAT + help submit the reports (if needed) are also much appreciated. If you know a good EU based accountant who can help with that, would be helpful as well.
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Hey,

Currently EU has a common system for this, so you can pay VAT in one country, and then based on your sales geography this country will distribute payable VAT to other countries.

VAT will be mainly applicable only for B2C sales. There are large and small companies specializing in this so you can contact one of them to assist. I can also introduce you if needed.

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https://locked.money - Your Crypto Management Company, Ready in Days ”“ Trade, Invoice, $1,200/Year!

 

[noname]

Just look at how big corps doing like Google, Apple, i.e you sell an app to someone in Germany (B2C) then German VAT is calculated and deducted from your sale. Same is for other countries. These big corps earn billions so they can't hide or avoid paying. However many companies don't do it like this. I never hear someone having problems but who knows depending on your revenue from specific country and what might change in future.

Should be no VAT for digital services you sell abroad, but EU figured that makes unloyal competition to local companies who must pay VAT. Thats why they changed these rules from some years ago.

 

[Don]

noname said:
Just look at how big corps doing like Google, Apple, i.e you sell an app to someone in Germany (B2C) then German VAT is calculated and deducted from your sale. Same is for other countries. These big corps earn billions so they can't hide or avoid paying. However many companies don't do it like this. I never hear someone having problems but who knows depending on your revenue from specific country and what might change in future.

Should be no VAT for digital services you sell abroad, but EU figured that makes unloyal competition to local companies who must pay VAT. Thats why they changed these rules from some years ago.
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You are right, and it is getting increasingly difficult and soon practically impossible to avoid paying VAT without getting caught.

 

[maxiz]

Marzio said:
If you provide consulting why are you looking for an accountant?

Consultancy is human rendered service, not electronic hence no VAT.
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So if US LLC charges private client for online coach session, its service provided online, there is no VAT.
could you confirm?

 

[JustAnotherNomad]

maxiz said:
So if US LLC charges private client for online coach session, its service provided online, there is no VAT.
could you confirm?
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AFAIK, there are some revenue thresholds. Once you reach the threshold, you have to pay VAT.

 

[maxiz]

JustAnotherNomad said:
AFAIK, there are some revenue thresholds. Once you reach the threshold, you have to pay VAT.
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I think you are talking about UK

https://www.gov.uk/how-vat-works/vat-thresholds
The question, how does US LLC do

 

[JustAnotherNomad]

maxiz said:
I think you are talking about UK
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I think you're misunderstanding my comment.

But it actually seems like thresholds have been abolished and you now have to register immediately if you have B2C sales to EU customers.
You can use the Non-Union One-Stop Shop (OSS) scheme, so that you only file VAT returns in a single EU country, no matter the countries your EU customers are based in.
VAT applies to all services, not only digital services.

It should be very clear that VAT applies, otherwise non-EU companies would have a competitive advantage over EU companies.

If a company is selling its B2C services in the EU from outside the European Union then the company needs to register for the Non-Union Scheme of the new One-Stop shop. In the same manner as before, with the Non-Union OSS scheme, companies can sell their services into many EU member states, make only one declaration and remit the total of the VAT due in one Member state where they are registered for the OSS.
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https://www.globalvatcompliance.com/globalvatnews/vat-on-services-to-eu/
See also:
https://www.bzst.de/EN/Businesses/OSS_non_Union/OSS_non_union_scheme/OSS_non_union_scheme_node.html
It's optional to use the Non-Union OSS scheme, you could also register in each country where you have customers and then file separate returns, but why would you do that.
The important thing is that you definitely have to charge VAT if you have B2C sales with EU customers, no matter where your company is based.

Last edited: Dec 19, 2023