US SaaS Selling Abroad: B2B vs B2C for VAT and GST

If you incorporate in Delaware and sell software internationally, the most consequential field on your invoice is not the price. It is the buyer's tax status. The same monthly subscription to the same country can mean zero foreign tax administration or a registration obligation that started on the first sale. The split is B2B versus B2C, and US sellers feel it differently than EU sellers do.

Why this asymmetric for US sellers specifically

An EU SaaS company selling to another EU country has a domestic baseline: it is already VAT-registered, it already files. Adding cross-border B2B or B2C is a marginal change. A US SaaS company has no federal VAT and usually no foreign VAT footprint until the day a foreign tax authority says otherwise. Every overseas sale is the first sale somewhere. That makes the B2B versus B2C call the gate that decides whether registration is triggered at all.

There is a second asymmetry. Most countries that tax inbound digital services apply a reverse charge to B2B sales: the buyer self-assesses, you do nothing. For B2C sales the same countries apply destination-country VAT from the first dollar, often with no threshold at all for non-residents. So a US company with a 100% B2B book can sell into 50 countries with zero foreign registrations. A US company with a single inadvertent B2C sale in the UAE owes UAE VAT.

How a foreign tax authority decides if your buyer is B2B

The legal test in most regimes is whether the buyer is a "taxable person" carrying on economic activity. The operational test, the only one you can implement at checkout, is whether the buyer presents a valid local tax registration number that you can verify in real time:

• EU: a VAT number validated against VIES.
• UK: a GB-prefixed VAT number validated against HMRC's check service.
• Canada: a GST/HST number issued by the CRA.
• Australia: an ABN plus GST registration status checked against the ABR.
• Japan: a Qualified Invoice Issuer registration number (T-prefixed) where you need it for invoice issuance; reverse charge for specified electronic services applies to JCT-registered businesses.
• India: a GSTIN that puts the customer into the reverse charge for OIDAR services.

"We're a business, trust us" is not a defence. If your billing system did not store a verified number with a timestamp and a successful validation response, the default assumption in an audit is B2C. The seller becomes liable for the VAT that should have been charged.

The four operational outcomes

Crossed against B2B versus B2C, every inbound digital services regime resolves to one of four cells:

The implication for product and finance: the only column that frees you from a foreign tax footprint is the first one. Everything else is a registration somewhere.

Jurisdiction by jurisdiction for US sellers

European Union

For B2B sales of electronically supplied services, EU VAT Directive Article 44 puts the place of supply in the customer's country, and Article 196 shifts the VAT liability to the customer via reverse charge. You invoice at 0% and write the wording "Reverse charge, Article 196 VAT Directive" on the invoice. No EU registration required for these sales.

For B2C sales, Article 58 puts the place of supply in the consumer's country, and you must charge that country's VAT rate (anywhere from 17% in Luxembourg to 27% in Hungary). There is no threshold for non-EU sellers. The simplification is the Non-Union OSS, which lets you register in one EU member state and file a single quarterly return covering all 27. Without OSS, the alternative is 27 direct registrations.

United Kingdom

For B2B, the UK applies a reverse charge that mirrors the pre-Brexit EU mechanism. A US seller invoicing a GB VAT-registered customer charges 0%. For B2C, there is no registration threshold for non-resident digital services suppliers. One consumer sale to a UK resident triggers a UK VAT registration with HMRC and 20% VAT collection thereafter. The UK left VIES, so GB numbers must be checked against HMRC's own validation service.

Canada

The federal GST (5%) and HST (13% to 15% in participating provinces) apply to inbound digital services under the simplified GST/HST regime for non-residents. B2B customers with a GST/HST number self-assess; you invoice at 0%. B2C customers (or B2B customers without a number) trigger collection at the destination provincial rate once you cross CAD 30,000 in B2C sales over a rolling 12 months. Quebec runs a parallel QST regime with its own registration.

Australia

GST at 10% applies to inbound digital services. A buyer with an ABN and GST registration takes the supply out of GST. B2C sales count toward the AUD 75,000 rolling 12-month threshold for the simplified GST registration for non-residents. Once registered, you collect 10% on B2C and continue to zero-rate validated B2B.

Japan

JCT applies to inbound digital services. For "specified" B2B electronic services (the category most enterprise SaaS falls into), a reverse charge shifts liability to the JCT-registered customer. B2C sales follow the standard non-resident JCT registration path. Separately, the Qualified Invoice system (introduced October 2023) means buyers who want to claim input tax credits need an invoice from a registered T-number issuer; some Japanese enterprise buyers will refuse non-compliant invoices regardless of the underlying VAT treatment. See our JCT qualified invoice guide.

India

India's OIDAR regime taxes inbound digital services at 18% IGST. B2B customers with a GSTIN self-assess under reverse charge. B2C registration is required from the first sale; there is no threshold. Treat unverified buyers as B2C by default; the OIDAR enforcement posture has tightened, and the Indian Revenue actively pursues non-registered foreign vendors. See our India OIDAR enforcement note.

UAE and Saudi Arabia

Both apply VAT (5% UAE, 15% KSA) on inbound digital services with zero threshold for non-residents. The reverse charge applies to B2B sales where the buyer holds a local VAT registration (TRN in the UAE). One B2C sale triggers registration.

The same transaction, four ways

A US SaaS company, $1,000 monthly subscription, customer in Germany.

What your billing system needs to capture

The classification is not a one-time onboarding question. It is a per-invoice determination:

1. Buyer country. Anchored by at least two non-conflicting pieces of evidence (billing address, IP, payment instrument BIN, phone country code). See our note on two-piece location evidence.
2. Buyer tax number. Collected at checkout, optional but heavily incentivized for business buyers.
3. Validation response. Stored with the response payload and timestamp from VIES, HMRC, ABR, or the relevant national service. This is the audit artifact.
4. Determination date. The validation must be live at the time of supply. A VAT number that was valid at signup but was revoked six months later does not protect a current invoice.
5. Invoice wording. Reverse charge invoices need a specific legal phrase per jurisdiction. The wording for one country is not interchangeable with another. See our invoice wording guide.

Common US-seller mistakes

Treating company email domains as proof of B2B

An @acme.com email and an "Acme Corp" billing name look corporate but carry no legal weight. Only a validated tax number does. Many checkout flows silently default to B2B on the email signal and undercollect VAT on every consumer using a work address.

Not registering for OSS until the first invoice goes out

Non-Union OSS registration is prospective. If you make a B2C sale before you are registered, that sale falls outside OSS and must be reported in the consumer's country directly. The clean path is to register before your first European B2C sale, even if you expect almost all business buyers.

Accepting "we are tax exempt" notes as a substitute for a VAT number

Exemption certificates work for US sales tax. They do not work in foreign VAT regimes. The only B2B trigger that matters is a validated tax registration number in the buyer's country.

Assuming Stripe Tax or a Merchant of Record covers everything

Stripe Tax handles the calculation, not the registration; you are still the seller of record. A Merchant of Record (Paddle, Lemon Squeezy, FastSpring) does become the seller of record, but only for sales it actually processes. Direct-billed enterprise contracts, ACH invoices, manual Stripe invoices outside the MoR flow: all yours. See Merchant of Record vs self-remitting.

Forgetting the per-jurisdiction invoice wording

"Reverse charge" alone is not enough in most countries. The EU expects a specific Article reference. The UK expects "Reverse charge: customer to account for VAT to HMRC". Japan, India, and the GCC each have their own required wording. Wrong wording can void the reverse charge in an audit even if the underlying classification was correct.

Frequently asked questions

As a US SaaS company, do I owe foreign VAT on B2B sales?

In most jurisdictions with a reverse charge (EU, UK, Australia with ABN, Canada with a GST/HST number, Japan for specified services, India for GSTIN holders), no. The buyer self-assesses. The qualifying condition is a validated buyer tax number, not the buyer's industry or website.

Do I need to register for VAT if I only sell B2B abroad?

If your model is genuinely B2B-only and every customer presents a verified local tax number, no registration is required in any reverse-charge country. The risk is a single B2C sale slipping through. Most countries set a zero or very low threshold for non-resident B2C digital services, so one consumer sale can trigger registration.

How do I prove a foreign customer is a business?

Collect and validate the buyer's tax registration number at checkout. EU buyers provide a VAT number checked against VIES; UK buyers provide a GB number checked against HMRC; Australian buyers provide an ABN plus GST status checked against the ABR; Canadian buyers provide a GST/HST number. Store the validation response and timestamp.

What changes if I sell through a Merchant of Record?

A Merchant of Record becomes the seller of record for tax purposes on the sales it processes. It owns the B2B versus B2C classification, the registration, and the remittance for those sales. Direct-billed customers (annual enterprise contracts on net terms, custom invoices outside the MoR flow) remain your responsibility.

Can a B2C customer become B2B mid-subscription?

Yes. If a customer adds a valid tax number partway through, the treatment flips from that point forward, from destination VAT to reverse charge. Prior invoices stand as issued. Your billing system needs to apply the new treatment to the next invoice without retroactively crediting older ones.