Stripe exceeded the tax threshold

[Cari]

Hi!

We operate via the US LLC and provide online consultancies. Recently Stripe sent a notification that the "tax threshold was exceeded". It shows just a list of countries and writes "exceeded". Did anyone have same issue? What does it mean and what should we do?

 

[aniglo22]

I think you forgot to went over the threshold over 10k in the EU for vat (under 10k you charge your local one ) or also other countries . You need to register for VAT in these countries and pay it.

 

[Cari]

I think you forgot to went over the threshold over 10k in the EU for vat (under 10k you charge your local one ) or also other countries . You need to register for VAT in these countries and pay it.

yes, we are not registered for VAT. Do you mean that 10K is the limit for the whole EU or each country separately? As if each country separately, in some of it we did not reach the 10K amount of sales and it is still indicated as "exceeded the threshold".

 

[aniglo22]

yes, we are not registered for VAT. Do you mean that 10K is the limit for the whole EU or each country separately? As if each country separately, in some of it we did not reach the 10K amount of sales and it is still indicated as "exceeded the threshold".

Eu in a whole

But it's for b2c cross-border sales within the EU .
If you business is outside the EU you would need to charge vat at the first sale (B2C)- .

It also depends on the nature of your business . Are you engaging in B2B or B2C ?

 

[Cari]

Eu in a whole

But it's for b2c cross-border sales within the EU .
If you business is outside the EU you would need to charge vat at the first sale (B2C)- .

It also depends on the nature of your business . Are you engaging in B2B or B2C ?

we are doing B2C. The business is outside the EU, as the company in registered in the USA and the manager is also living outside the EU.

We received several consultancies regarding the VAT and the conclusion was, that we do not need to charge VAT as long as we do not have the permanent establishment in the EU (which we dont) and provide consultancies online and not in the pre-recorded mode.
So is it really true or they made a mistake?

 

[aniglo22]

we are doing B2C. The business is outside the EU, as the company in registered in the USA and the manager is also living outside the EU.

We received several consultancies regarding the VAT and the conclusion was, that we do not need to charge VAT as long as we do not have the permanent establishment in the EU (which we dont) and provide consultancies online and not in the pre-recorded mode.
So is it really true or they made a mistake?

But VAT is based on place of supply (where your customer is ) and not if you have PE.
And also PSP (payment service provider ) are required to report certain cross-border payments to EU tax authorities. (CESOP)
To my knowledge you would need to charge VAT starting from the first sale .
You could use the One-Stop Shop (OSS) system to simplify VAT reporting and payment.

In addition, the European Union applies VAT to sales by non-European Union-based companies of electronically supplied services to European Union-based non-business customers.

Source : EU - Value Added Tax (VAT).

 

[CyprusLawyer101]

Each EU jurisdiction has a different threshold and different vat rate , you should know which one is what and register and pay it accordingly

 

[aniglo22]

Each EU jurisdiction has a different threshold and different vat rate , you should know which one is what and register and pay it accordingly

But these limits are only for residents (I could be wrong ) ,the limits for non-residents within the eu is 0 .

 

[CyprusLawyer101]

But these limits are only for residents (I could be wrong ) ,the limits for non-residents within the eu is 0 .

I don't think so, the thresholds should apply when trading with the country or establishing a VAT branch by meeting certain thresholds and criteria. The VAT rate for each jurisdiction must meet a certain common level but each member state has the right to deviate a bit resulting into a different vat rate for each. I haven't came across the distinction between residence and non residence you are making reference to, maybe you could elaborate ? are you referring to the reverse charge mechanism?
Also different services have different treatments. The type and method of consluting OP is doing should have an effect on their final requirements.

 

[aniglo22]

I don't think so, the thresholds should apply when trading with the country or establishing a VAT branch by meeting certain thresholds and criteria. The VAT rate for each jurisdiction must meet a certain common level but each member state has the right to deviate a bit resulting into a different vat rate for each. I haven't came across the distinction between residence and non residence you are making reference to, maybe you could elaborate ? are you referring to the reverse charge mechanism?
Also different services have different treatments. The type and method of consluting OP is doing should have an effect on their final requirements.

No it's b2c so there is no reverse charge . Here is a source I could find : 2024 European VAT registration & Intrastat thresholds - vatcalc.com

The new VAT rules state that there will be an EU-wide threshold of €10,000, applicable to sellers established in the EU. There is also a €0 (zero) threshold for non-EU sellers.

Source: The New EU VAT Tax Rules, Explained

I don't think so, the thresholds should apply when trading with the country or establishing a VAT branch by meeting certain thresholds and criteria. The VAT rate for each jurisdiction must meet a certain common level but each member state has the right to deviate a bit resulting into a different vat rate for each. I haven't came across the distinction between residence and non residence you are making reference to, maybe you could elaborate ? are you referring to the reverse charge mechanism?
Also different services have different treatments. The type and method of consluting OP is doing should have an effect on their final requirements.

I'm also not reffering to the vat rates only to the thresholds.

 

[CyprusLawyer101]

No it's b2c so there is no reverse charge . Here is a source I could find : 2024 European VAT registration & Intrastat thresholds - vatcalc.com


Source: The New EU VAT Tax Rules, Explained


I'm also not reffering to the vat rates only to the thresholds.

This is intrastat - for trading in goods only

 

[aniglo22]

This is intrastat - for trading in goods only

There are two columns :

VAT Registration thresholds

Intrastat thresholds

Another source : 2021 EU VAT registration thresholds - Avalara

Generally, non-resident (no permanent establishment) businesses that must register for VAT in another EU state face a nil registration threshold.

 

[diro]

Does it mean if you get over 10K in EU they will start charging VAT for all your transaction after that, if yes, at which rate?

 

[JackAlabama]

what happens if one happily ignores this?
Stripe just sends the reminders but nothing happens.

 

[Cari]

what happens if one happily ignores this?
Stripe just sends the reminders but nothing happens.

I guess stripe now has to report everything to the tax authorities. But is there a difference if we provide online consultancies instead of pre-recorded? Is it really true that in this case we do not have to charge VAT?

 

[daniels27]

I guess stripe now has to report everything to the tax authorities. But is there a difference if we provide online consultancies instead of pre-recorded? Is it really true that in this case we do not have to charge VAT?

Are you working face to face with clients individually? I mean like you come to me ask a question, I go online look it up, tell you my result and charge you. Then, you do not have to charge VAT, that is correct.

You can check here
https://europa.eu/youreurope/business/taxation/vat/vat-digital-services-moss-scheme/index_en.htm
I once explained this here
https://www.offshorecorptalk.com/th...s-in-the-eu-what-to-expect.42814/#post-284603
Stripe mainly helps you to monitor as they explain you here, if you are not subject to VAT, you do not need to worry.
https://docs.stripe.com/tax/dashboard#thresholds

Thresholds​

Stripe Tax provides insights about your potential tax registration obligations (called economic nexus in the US). We help you understand which state or country you might have such obligations in, even if your business doesn’t have a physical presence there.

You can monitor tax obligations in the following categories:

• Threshold exceeded: Where your estimated sales or transactions are over the location’s threshold and your business probably needs to register for tax.
• To monitor: Where you haven’t exceeded a threshold yet, but you do have buyers located in that market. We’ll provide a percent-to-threshold to help you determine when you might need to register.
• Unattributed revenue: When Stripe Tax isn’t able to determine the location for a transaction, we group its information under this category. Where possible, we break out globally unattributed revenue and US unattributed revenue.

So in your case, you can ignore it and move on.

Each EU jurisdiction has a different threshold and different vat rate , you should know which one is what and register and pay it accordingly

No, this is for EU resident companies providing local services or selling local goods only.

But these limits are only for residents (I could be wrong ) ,the limits for non-residents within the eu is 0 .

Yes, they are only for residents and only if the resident is charging VAT in his own state. He can then charge his own rate rather than the rate of his customer.
https://europa.eu/youreurope/busine...es-abroad/index_en.htm#rules-annual-turnovers

No it's b2c so there is no reverse charge . Here is a source I could find : 2024 European VAT registration & Intrastat thresholds - vatcalc.com

Yes, correct. Intrastat is for statistics and not for VAT and also mainly for B2C.

This is intrastat - for trading in goods only

Depends on the location. Some countries also want a report on services.

Does it mean if you get over 10K in EU they will start charging VAT for all your transaction after that, if yes, at which rate?

You have to charge and at the rate of the customer's location.

I'm also not reffering to the vat rates only to the thresholds.

For sale of products etc. there are other rules and there are higher thresholds like 100k EUR for German companies selling goods to Germans.

 

[Cari]

Are you working face to face with clients individually? I mean like you come to me ask a question, I go online look it up, tell you my result and charge you. Then, you do not have to charge VAT, that is correct.

You can check here
https://europa.eu/youreurope/business/taxation/vat/vat-digital-services-moss-scheme/index_en.htm
I once explained this here
https://www.offshorecorptalk.com/th...s-in-the-eu-what-to-expect.42814/#post-284603
Stripe mainly helps you to monitor as they explain you here, if you are not subject to VAT, you do not need to worry.
https://docs.stripe.com/tax/dashboard#thresholds

So in your case, you can ignore it and move on.


No, this is for EU resident companies providing local services or selling local goods only.


Yes, they are only for residents and only if the resident is charging VAT in his own state. He can then charge his own rate rather than the rate of his customer.
https://europa.eu/youreurope/busine...es-abroad/index_en.htm#rules-annual-turnovers

Yes, correct. Intrastat is for statistics and not for VAT and also mainly for B2C.


Depends on the location. Some countries also want a report on services.


You have to charge and at the rate of the customer's location.


For sale of products etc. there are other rules and there are higher thresholds like 100k EUR for German companies selling goods to Germans.

90% of the business is that the client pays, we schedule a 1 hour call and thats it.

10% of the business is that the clients either receives the paper version with the advise or they further receive the service from some of our partners located in the EU. However the payment is done to us, so again without VAT and later we pay to the partners. So it is like this:
client pays to us->service is provided by EU partner->we take our commission and the rest pay to the partner in the EU.

Do you think everything is ok or we are subject to VAT?

 

[daniels27]

90% of the business is that the client pays, we schedule a 1 hour call and thats it.

Probably now. What service is it exactly?

§ 3a UStG (1)
https://www.gesetze-im-internet.de/ustg_1980/__3a.html

10% of the business is that the clients either receives the paper version with the advise or they further receive the service from some of our partners located in the EU. However the payment is done to us, so again without VAT and later we pay to the partners. So it is like this:
client pays to us->service is provided by EU partner->we take our commission and the rest pay to the partner in the EU.

The part where you give your advice on pdf instead over the phone follows above, i.e. no VAT.

The part where an EU guy works, most likely is subject to VAT on the full amount paid by the consumer. Do you know what exactly they do?

https://www.gesetze-im-internet.de/ustg_1980/__3a.html
Part 4 is interesting:

Eine Vermittlungsleistung an einen Empfänger, der weder ein Unternehmer ist, für dessen Unternehmen die Leistung bezogen wird, noch eine nicht unternehmerisch tätige juristische Person, der eine Umsatzsteuer-Identifikationsnummer erteilt worden ist, wird an dem Ort erbracht, an dem der vermittelte Umsatz als ausgeführt gilt.

In other words your referral service is taxable where the service is performed.

I quoted the German version as they are usually the most precise ones. But the law is the same for all EU. You could also check in the directive directly.

 

[Cari]

Probably now. What service is it exactly?

§ 3a UStG (1)
https://www.gesetze-im-internet.de/ustg_1980/__3a.html

The part where you give your advice on pdf instead over the phone follows above, i.e. no VAT.

The part where an EU guy works, most likely is subject to VAT on the full amount paid by the consumer. Do you know what exactly they do?

https://www.gesetze-im-internet.de/ustg_1980/__3a.html
Part 4 is interesting:

In other words your referral service is taxable where the service is performed.

I quoted the German version as they are usually the most precise ones. But the law is the same for all EU. You could also check in the directive directly.

90% of the business we have calls with clients and consult them how to relocate abroad.

For the referral it is quite clear, I guess we really have to charge VAT.

However, why do you say that pdf file is not subject to VAT and an online call is? I thought it is vice versa. Could you please explain it a bit?

 

[daniels27]

90% of the business we have calls with clients and consult them how to relocate abroad.

However, why do you say that pdf file is not subject to VAT and an online call is? I thought it is vice versa. Could you please explain it a bit?

I think there is a misunderstanding. If you write the pdf with custom advice, it is same as a phone call and no VAT. If you sell eBooks, they are subject to VAT as it basically is a digital product.