California Desk: Selling software in Europe

Adrienne Huesca heads our California office to help guide businesses as they expand into the EU market. Adrienne serves as strategic advisor to acquisition teams, investors, entrepreneurs from her base in San Francisco.

What do businesses need to do to sell goods, software or technological services in the EU?

• VAT: Clearly, you need to manage VAT for your sales.
• Website compliance: Your website must comply with data protection laws in the EU.
• Industry compliance: In certain industries such as the telecom industry, your business must comply with specific regulations.

VAT

While the following is a simplification of the VAT rules, they generally apply:

• You will need to charge VAT to your clients in the EU. Do I always need to charge VAT? The payment of VAT depends on the country where the transaction has occurred.
• If you charge VAT on goods, then you need to pay this VAT to the country where the client is located.
• In order to pay VAT to a country, you need to be VAT registered in that country. There is no need to create companies in the EU. You can VAT register your foreign business. The simplest way to register in all the countries of the EU in one shot is through "MOSS".
• Once registered, then you will need to fill out tax forms in each country where you need to pay VAT.
• On your invoices to the client, you must charge the correct VAT rate for the country and sometimes region. See these rules about how an invoice needs to look.

Website compliance

Data protection: Any time you receive and store personal data about people, whether they are clients or not, you must comply with your country's laws on data protection. This means that any contact form on your website is an issue for compliance. If you save client data to a database, then where and how this database is saved and stored are also guided by regulations.

Can a single website fulfill compliance issues in the whole EU? Normally, the EU passes directives, which serves as a minimum requirement as countries then pass their own regulations. Usually with certain procedures in place, you can fulfill the regulations of all the countries of the EU.

Industry compliance

Read our compliance page to find out more about general compliance issues in Spain, as well as issues specific to your industry.

FAQs:

How to determine where the transaction has occurred?

For goods, it is clear: you pay VAT to the country where the goods were delivered. For services, the country that applies is the one where you performed the services. For software and other technology such as phone services, it is not obvious whether the purchase constitutes goods or a service. It can be argued where the service was really performed.