Legal, Tax, and Accounting November 3, 2020

Why we didn’t choose Stripe to handle EU subscriptions

Onno Schwanen @0nn0

Hi everybody!

We have gotten some good insights from several posts on IndieHackers regarding payment integration for your SaaS. We thought we'd pay it forward and share our findings of how to correctly setup subscription payments for charging VAT/taxes in Europe.

👉 https://medium.com/slight-pause/how-to-setup-saas-subscriptions-correctly-to-charge-vat-in-europe-d75d857b5d01

Let us know if you have any questions/comments, happy to help out!

  1. 4

    Hate VAT Moss and all this stuff, this is what making building businesses in the EU so hard and complicated.

    I like how Gumroad handle this for people, though this obviously isn't ideal for many.

    For Rosieland we are moving off of Substack, for a few reasons but the tax one is a non negoitable one. Currently we have access to a 'dynamic_tax_rates' beta via Stripe, though it still requires a chunk of set up time our side. It feels like the best way forward as we have a long term view and worry about relying on third party tools. Thank god my husband deals with all of that and not me 😅

    1. 1

      Haha, lucky you! So you plan on moving away from Substack but intend to keep using Stripe for payment? I read that Substack uses Stripe as their payment provider.

  2. 2

    Thanks a lot. This post cannot be upvoted enough given the invaluable information presented in the linked article. 👍

  3. 2

    Thank you so much for this! Somehow this subject seems to be neglected a lot and it's a true struggle for EU-based startups.

    When setting up a payment flow for Shipright about 2 years ago, this gave me true headaches and costed way too much time. In the end we used Chargebee (which can do the VIES verification, conditional taxing, etc). It was a lot of work to set it up the way we wanted and I had to use a lot of Zapier and other hacks to get the experience right.

    Paddle seems to be a lot easier!

    1. 2

      Thanks for sharing your experience! Yeah, it also took us by surprise. We thought it would be a matter of plug-and-play...

  4. 2

    VAT needs to be calculated and reported. Surprisingly Stripe does not directly offer this service yet

    Yes they do, I joined the beta program for this (which anyone can do). See https://stripe.com/docs/payments/checkout/taxes

    1. 2

      The beta is for one-time payments, though. Not subscriptions... at least that's what the Stripe docs say.

      1. 3

        I'm using it for subscriptions.

        1. 1

          😲 I should try to apply then!

    2. 1

      Holy cow this looks like a game-changer! Presumably this means Quaderno/octobat etc. are not required?

    3. 1

      Yes, I think that's what we are on too.

  5. 2

    Thanks for sharing this post 🙂 With a B to C customer, how do you determine where the customer is registered for VAT? Is it where there CC is registered? Or is it their current address. Just wondering in relation to digital nomads -- where you might have for example a European resident living and working from a non Vat country.

    1. 1

      I just know how this works in Germany. You need two points from where the country of the customer can be deduced from. One may be the country that the customer selects during registration, another may be the country of his IP address. I don't know exactly how to handle a customer where the two points are a mismatch. (But to be safe I would tax it according to where the customer is more likely based or where you pay a higher tax rate)

      1. 1

        Two points makes sense, thanks 🙂

  6. 2

    Curious to hear others experiences of Paddle.

    1. 1

      Handling taxes is great, the API makes me wanna cry.

    2. 1

      I've had a pretty good experience with Paddle so far with JustSketchMe. There are a few quirks here and there that I had to work through, but overall it's been a fairly hassel free and painless experience.

      On my other project, Bear Blog, I also received a generaic AUP message like @KW_dev.

    3. 1

      Unfortunately with Paddle it's not all great as well. The biggest issue is that they review your app/product and they can just don't want to support it.

      I'm currently at the moment of figuring out how to tackle payments in EU (I'm based in EU as well). Unfortunately, Paddle rejected supporting payments on my website.

      1. 1

        Sorry to hear that. What's the reason that they rejected? We were able to get approved with no issues after they asked us to make a slight change on the website.

        1. 1

          I received a generic response:

          We took a look at your business and unfortunately it appears that you are selling products or services that we don't currently support (as clarified on our Acceptable Use Policy (AUP) ), so we may not be the right platform for you.
          It was at the time when I was doing a presale for https://getaproductjob.com/. Maybe now it would pass their review.

          1. 1

            I had a similar experience but I contacted them via Twitter and eventually got accepted. Not a great onboarding experience but I'm otherwise pretty happy with them so far.

      2. 1

        Sorry to hear that!

  7. 1

    I'm so glad I chose Paddle for Sizzy. I didn't have to deal with absolutely anything regarding taxes. It's a bliss!

  8. 1

    Wow, awesome write up! 👏👏

    This was such a struggle for me as well! Even if you manage to get the right combination of tools, wiring everything together and maintaining this little monster no one wants as things evolve and regulations change is a challenge by itself...

    We're working on Abowire (abowire.com), an EU-based platform to automate subscriptions businesses. I'd love to hear more about how we could make it easier for makers to build their products. Would anyone be interested in giving us feedback? :)

  9. 1

    My accountant told me I could use the home country VAT (Portugal in this case) on other EU countries. I then got confirmation from another accountant, so that's what I'm currently doing.

    My DIY solution is to check whether or not the billing country was in the EU and, if yes, apply the Portuguese VAT. This is the only registered tax rate I have on Stripe.

    My biggest problem, however, is still this: https://www.indiehackers.com/post/stripe-portuguese-tax-authority-19036433f0

  10. 1

    Tax Agony.... I'm also using Paddle for this exact reason and loving it :)))

  11. 1

    Have you compared Gumorad with Paddle? What do you think about Gumroad?

    1. 2

      I've used both Gumroad and Paddle extensively for JustSketchMe. Gumroad is fine if you're just selling license keys (or other digital products). I love Gumroad, no mistake. However, when building a SaaS we found we needed payments to integrate into our platform, so after the first year of using Gumroad, we've fully moved over to Paddle to handle our subscriptions.

  12. 1

    Great article. Thanks a lot!

    We used Stripe + Quaderno, but Quaderno costs about $49 / month even if you don't have any sales. And that's only for calculating the correct amounts for VAT and for preparing reports and invoices.

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