March 21, 2019

Legal questions regarding starting a SaaS subscription business from France/Europe

I'm considering building a SaaS business in order to productize my experience.

This is part of the mental process of many freelancers around me, especially in the software world. The idea of running such a business is to reduce the load on client work in order to make more money, work less or have more impact. This is actually also the normal growth of any business.

There are a bunch of issues that I've noticed my clients have, and that I could turn into a product. I mostly work with small businesses in the tech world. At this moment, I think my target market is B2B tech SMBs/startups who already buy SaaS software, in Europe, the US, Canada, and Australia. The companies in the USA are particularly interesting because they have a very good culture of buying instead of doing. In France, I've noticed we often do the opposite…

One of the issues I'm facing at this point is… the legal stuff! Most of the indie movement takes place in the US, so billing/VAT is pretty clear in the mind of the founders who can easily find legal counsel. It is not clear to me how things work for companies elsewhere, and in particular from France where my company is.

My questions are:

  • how to deal with the VAT for non-European countries?
  • how to deal with other taxes in an international context?

Regarding VAT: I already have incorporated my freelance company in France. Most of my clients are French and pay the VAT as expected. From what I understand, the VAT/MOSS scheme allows me to bill the VAT to European clients, and I think North-American companies wouldn't pay VAT. Services like Octobat seem to deal with the details, compute amounts and declare taxes on my behalf. Did I get things right?

Regarding taxes: I thought it would be enough to have a company, and that that company would pay all the taxes in the country it is installed. So in my mind, if I bill 100$ to a client in California through my French company, I have to pay taxes on those 100$ in France. Apparently, I'd also have to pay taxes in California, and in all the states where I have clients. In some threads, I've read that having a company in Ireland would solve the tax problem, but I don't understand why it'd do so. Taxes in Ireland are lower than in many other countries, but if I understand things correctly I'd still have to pay the taxes in the countries where I am billing.

Did people go that route before? How did you do? Do you know someone I can talk to who can help me?

(There are many other pressing issues of course: am I making the right product, are these people trying it actual users of such a product?… but I can find answers on my own to those questions. It's my job actually.)

  1. 1

    I wonder if you could pop the SAAS into its own company, separate from the freelance business. Might give you another VAT threshold, one where once you hit, you know it’s worth solving the legalities

  2. 1

    Honestly, TLDR, but about VAT, know that starting from 2019, you don't have to setup the MOSS if you make under a certain amount of payment in the EU per year (I think its 10k?).

    In that case, you put the French VAT (20%) to any payments in the EU that doesn't have a VAT Number provided.

    I recommend you to check with your accountants about it.

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