Question VAT/GST avoidance for offshore company

[bamwa]

Hi, my company provides online software and is based in Gibraltar. As Gibraltar does not have any VAT/GST, I have not charged this to users. However, I understand now that most countries require foreign businesses to charge VAT if they sell to people in their country ex. if I sell my software to someone in Australia then I need to pay GST to the Australian tax agency, same with UK and others.

There are no VAT/GST agreements between countries (like there are with income tax) so I dont think the countries have any legal basis for asking me to pay as per their made up rules and have no way to enforce this anyway. I am wondering how others are dealing with this? Do you charge VAT and pay it to the authorities or do you just avoid it? What can tax authorities do? Would they be able to block my website or get stripe to close my account (this is my biggest risk)?

 

[daniels27]

bamwa said:
Hi, my company provides online software and is based in Gibraltar. As Gibraltar does not have any VAT/GST, I have not charged this to users. However, I understand now that most countries require foreign businesses to charge VAT if they sell to people in their country ex. if I sell my software to someone in Australia then I need to pay GST to the Australian tax agency, same with UK and others.

There are no VAT/GST agreements between countries (like there are with income tax) so I dont think the countries have any legal basis for asking me to pay as per their made up rules and have no way to enforce this anyway. I am wondering how others are dealing with this? Do you charge VAT and pay it to the authorities or do you just avoid it? What can tax authorities do? Would they be able to block my website or get stripe to close my account (this is my biggest risk)?
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Of course, the countries have legal bases. If you want to do business there, you need to comply with local regulations. Same as with casinos which are also getting blocked. Temu is blocked in Indonesia now. etc.

If you do not pay VAT, the EU or UK can seek legal action against your company, sue you in their courts and then request Gibraltar to enforce the court order.

For the EU, they are already getting your company details for over one year:
https://ec.europa.eu/commission/presscorner/detail/en/ip_23_6714

In any case, if you are small, probably not much will happen. You can then only claim that the user was using an IP from Botswana and that they listed Botswana as their home address and you thus did not charge VAT. Just note that this is not legal and sooner or later you may get caught.