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Having a VAT number in most EU countries has a fixed cost that is non-negligible. For a realistic example in Italy, having a VAT number implies a minimal fixed

by usernam 10y ago

Having a VAT number in most EU countries has a fixed cost that is non-negligible. For a realistic example in Italy, having a VAT number implies a minimal fixed yearly cost of ~300eur (combining all various expenses) even for zero income. If you already are an employee, any extra income is likely to be taxed higher and require extra bookkeeping, to the point that cost parity is only attained if you can invoice for at least 450-500 eur. This is purely wasted money, without considering the extra work that you have to put into for the tax records. It's simply not worth it.

izacus 10y ago
You misunderstood me, I didn't imply that you need a VAT number as a seller company (as a US company you can't even have it), but just that you should be able to produce a simple invoice PDF with your address, buyer address, buyer VAT (if needed) and a sequential number to provide a paper we need to properly add payment into the accounting books. And yes, I know that VAT isn't required piece of information on all invoices, but it WILL make the payment go smoother through the accounting departments which is what you want ;)
toyg 10y ago
Some of those costs are general accountancy that you would have to do anyway, as long as you try to sell anything. AFAIK the big problem with VAT, from a seller perspective, is the fact that most governments, knowing full well that 90% of businesses fail in the first 2 years, ask for big upfront payments on estimate VAT remittances in that window, to make sure they don't lose out. After 3 years, as long as your accountancy is correct, it should be smooth sailing.
- usernam 10y ago
  At least in Italy, this is exactly the opposite. The first 5 years you are given a "relatively" easy start, giving you a false sense of the costs involved. After the 5 year mark, the costs suddenly becomes 5-7x, often making the company fail.
  - zerr 10y ago
    Is it possible to "restart" the company? Maybe with slightly different name :)
    - usernam 10y ago
      There are several ways to obtain a VAT number, but the most economical is by binding the company to an individual, which of course won't be able to do so. There are other way to start companies that are not directly attached to a person, but this involves a much larger upfront capital, which is designed to avoid exactly this scenario.
raverbashing 10y ago
It's not worth if you're making less than 300eur per year. For any reasonable company (even a single founder one), 300eur is nothing
- usernam 10y ago
  I don't think you understand the implication: there's no way to have a small, side passive income in the 0-10k range. This is a big stopper for many OSS developers that could bootstrap themselves. With this limitation, many developers simply do not (and rightly so) put the effort in accepting anything in that ballpark because it's just extra work.
  - raverbashing 10y ago
    I agree. You could get payment without a vat number though
    - usernam 10y ago
      In this case, there are also rules for the amount of income you're allowed to get without a VAT. I'm pretty sure in most EU countries the profitability of a service supported by patreon (that is, a passive income in sub 10k range) would be almost nullified if correctly accounted for taxation. I had long discussions with friends about legally accepting money for side projects. It's a very hard topic to discuss. I'd be curious to know if anybody in an EU country is able to legally accept and declare a side income and retain anything more than 30%.

by usernam 10y ago

izacus 10y ago

You misunderstood me, I didn't imply that you need a VAT number as a seller company (as a US company you can't even have it), but just that you should be able to produce a simple invoice PDF with your address, buyer address, buyer VAT (if needed) and a sequential number to provide a paper we need to properly add payment into the accounting books. And yes, I know that VAT isn't required piece of information on all invoices, but it WILL make the payment go smoother through the accounting departments which is what you want ;)

toyg 10y ago

Some of those costs are general accountancy that you would have to do anyway, as long as you try to sell anything. AFAIK the big problem with VAT, from a seller perspective, is the fact that most governments, knowing full well that 90% of businesses fail in the first 2 years, ask for big upfront payments on estimate VAT remittances in that window, to make sure they don't lose out. After 3 years, as long as your accountancy is correct, it should be smooth sailing.

usernam 10y ago
At least in Italy, this is exactly the opposite. The first 5 years you are given a "relatively" easy start, giving you a false sense of the costs involved. After the 5 year mark, the costs suddenly becomes 5-7x, often making the company fail.
- zerr 10y ago
  Is it possible to "restart" the company? Maybe with slightly different name :)
  - usernam 10y ago
    There are several ways to obtain a VAT number, but the most economical is by binding the company to an individual, which of course won't be able to do so. There are other way to start companies that are not directly attached to a person, but this involves a much larger upfront capital, which is designed to avoid exactly this scenario.

raverbashing 10y ago

It's not worth if you're making less than 300eur per year. For any reasonable company (even a single founder one), 300eur is nothing

usernam 10y ago
I don't think you understand the implication: there's no way to have a small, side passive income in the 0-10k range. This is a big stopper for many OSS developers that could bootstrap themselves. With this limitation, many developers simply do not (and rightly so) put the effort in accepting anything in that ballpark because it's just extra work.
- raverbashing 10y ago
  I agree. You could get payment without a vat number though
  - usernam 10y ago
    In this case, there are also rules for the amount of income you're allowed to get without a VAT. I'm pretty sure in most EU countries the profitability of a service supported by patreon (that is, a passive income in sub 10k range) would be almost nullified if correctly accounted for taxation. I had long discussions with friends about legally accepting money for side projects. It's a very hard topic to discuss. I'd be curious to know if anybody in an EU country is able to legally accept and declare a side income and retain anything more than 30%.