Notes on remitting Stripe Tax to the UK and EU

Photo by Kelly Sikkema on Unsplash

I’ve been selling access to high resolution shadow maps on shademap.app for the past few months. This is known as a digital good and is subject to tax in various jurisdictions.

I use Stripe as my payment processor which calculates and collects the appropriate tax amount during checkout based on the buyer’s location. (More info: Stripe Tax)

However, it is my own responsibility to report and surrender (remit) the collected tax money to the appropriate authorities. Here are some notes I’ve compiled on the process in the UK and EU.

Thresholds #

Unfortunately, the threshold for remitting taxes in the UK and EU is $0. This means that you owe tax from your first sale.

Stripe Tax #

Stripe does the tax calculation and collection for you with one caveat: it will only start doing so for a jurisdiction once you enter the appropriate tax registration number. In both the UK and EU this is called a VAT ID and you need to obtain a separate one for the EU and one for the UK.

Obtaining a VAT ID #

Europe has banded together and created a system where you remit taxes for any EU sales to just a single EU country (See VAT OSS). This country then splits and forwards the appropriate amount to individual countries in the EU.

Luckily, there is one English speaking country in the EU, Ireland, and you can sell and remit taxes for all of Europe by obtaining a VAT ID from Ireland. (Details here) The process takes a few days and can be done online.

A similar but slower process (30 days) is followed with the UKs HMRS (Start here. In the Ireland you want to sign up for VAT OSS and in the UK for VAT.

Once you obtain the VAT numbers, you can enter them into the Stripe Tax dashboard and the checkout page will automatically begin collecting tax.

Filing a tax return #

Every quarter (3 months), you’ll need to tabulate your total sales by country and file a tax return. With the EU, you can do this on the Ireland ROS site.

In the UK it’s a bit more confusing because the government has outsourced tax filing to third party software vendors. This is called the Making Tax Digital for VAT (MTD) initiative. Luckily, many free software vendors exist and I found MTDSorted to be free and simple to use.

Stripe Tax can export all your transactions tallied by country for any time period which saves a lot of time. One caveat is if you configure Stripe to use multiple currencies, the spreadsheet ends up with multiple rows per country, one row per currency and you’ll need to convert those currency amounts to Euro or GBP, then tally them together.

Paying the tax #

For some reason, filing a tax return and paying the amount owed are two discrete steps. Once your return is accepted, you’ll need to wait a day or two for a payment ID to pay the EU tax and you can pay the UK tax right away.

Paying the EU tax with the Irish ROS requires a Visa or Mastercard and it rejects business credit cards which is annoying from a business accounting perspective. (I use AMEX for checking so was unable to try my business debit card)

The UK is fine in this regard and I was able to use my Chase Ink business Visa without any issues.

Miscellanous #

I found it discouraging that both tax authorities would still communicate using paper mail. I don’t know how much a stamp from the UK/EU to the US costs but I’d rather have them use these VAT funds for other purposes. :P

If you are a tax professional and I’ve made any mistakes here, please reach out with recommended revisions. Thanks!