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Tax for UK based SaaS startup with international customers (mostly US)

Hello, I am a SaaS startup based in the United Kingdom but with majority of customers in the United States. My product has not yet launched but will appeal to many SMEs who have an online presence, regardless of location. The model is freemium subscription. Does anyone have information on tax I should be charging in this situation for various countries? or Do I only have to worry about VAT for EU members (ie outside VAT countries I do not worry about tax)? Advice appreciated! Many Thanks


Topic Expert
Keith Perry
Title: Director of Global Accounting
Company: Agrinos, Inc.
(Director of Global Accounting, Agrinos, Inc.) |


My recollection of this (and feel free to consult with a tax person, especially since I'm American and not UK):
-You don't have *anyone* in the US. No employees, sales reps, rented presence what so ever. Preferably no bank account either....
-Your revenue is directed towards the use of the software (so is technically a royalty, even though you aren't licensing anything). This is a gray area that I believe is covered by the current language in the treaty, even though it pre-dates the popularity of SaaS.
-You've got no connection to your clients so everything is arms-length.
This puts you under the 2001 treaty, section 12, which basically says the UK gets to tax you and the US can't touch it.



Carley Morrow
Title: Entrepreneur
Company: comprized
(Entrepreneur, comprized) |

Hi KP,

many thanks! The answer to all those questions would be "yes" I'll look up that treaty and consult with a UK tax person.



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