EU OSS, UK VAT, India GST, AU/NZ GST and a long tail of LATAM digital-services rules all apply to AI and SaaS companies the moment they sell to a single consumer in those jurisdictions. There are no economic thresholds for digital services in the EU since 2015 — €1 of B2C revenue triggers VAT obligation in 27 member states. Running compliance yourself costs $40k–$120k/yr in fees plus 10–20 hours of finance time per month. A Merchant of Record like Macropay absorbs all of it for a flat 4.5% + $0.50.
The most expensive sentence in international SaaS is "we'll worry about VAT when we get bigger." In the EU, you crossed the threshold the day you took your first €1 in B2C revenue. There is no threshold. There hasn't been one since January 2015.
We pulled the books of 14 AI inference companies that came to us from Stripe in 2025. The median unrecognised VAT liability on those balance sheets was €137,000. The maximum was €1.4M. None of them had it on the cap table. All of them are now paying it down out of post-tax profit, with interest, while registering retrospectively in jurisdictions they didn't know they owed.
This is the article we wish someone had written for us.
The 2015 rule that changed everything
Before 2015, the place of supply for cross-border digital services in the EU was the seller's country. If you were a US SaaS company selling into Germany, your German customer paid US sales tax (or, more often, none at all). German VAT didn't apply because you had no German presence.
On 1 January 2015, the EU flipped that for B2C digital services. Place of supply became the buyer's country. A US SaaS company selling a $20 subscription to a consumer in Munich now owes 19% German VAT — €3.19 — to the German Bundeszentralamt für Steuern. Every transaction.
For sellers established outside the EU, there is no minimum. €1 of B2C digital revenue into the EU triggers registration. For EU-established sellers, a €10,000 annual threshold across all member states applies before OSS rules kick in. Most US AI companies are non-EU sellers. The threshold is €0.
The EU built two mechanisms to make this less painful — OSS (One-Stop-Shop) for goods, MOSS (Mini-OSS, since folded into OSS for services), and IOSS for goods under €150. Each one is a single registration that lets you file one return covering all 27 member states. They are better than the alternative (27 separate registrations) but they are still your registration, your filing, your liability.
Where VAT bites AI and SaaS specifically
Three things make AI/SaaS uniquely exposed:
- Digital delivery. No customs broker, no shipping label, no obvious import event. The tax authority has to find you.
- Self-serve checkout. Most customers don't supply a VAT number. You don't know if a sale is B2B or B2C without one. Default assumption: B2C, which means VAT applies.
- High transaction count, low ticket. A $4 ChatGPT-style monthly plan generates 12 invoices a year per customer. 10,000 customers in the EU = 120,000 invoices a year, each one a VAT obligation.
For an AI inference company with usage-based billing, the volume is worse. Every top-up, every credit pack, every overage event is a separate supply. Stripe Tax can compute the rate. It cannot remit. You can.
EU: OSS, IOSS, and the €10k threshold that doesn't apply to you
For non-EU sellers (most US AI companies) the path is:
| Step | What it is | What it costs |
|---|---|---|
| 1. Appoint EU fiscal rep | Required for non-EU sellers in most member states. | €3k–€8k/yr per state, or €4k–€12k for a single rep across OSS. |
| 2. Register for non-Union OSS | Pick a member state of identification (Ireland and the Netherlands are common). | Filing fee < €500. Setup time ~6–8 weeks. |
| 3. Collect VAT at the right rate | Rates range from 17% (Luxembourg) to 27% (Hungary). You need geolocation + B2B/B2C detection. | Stripe Tax: 0.5% per txn. In-house: 1 engineer-month + ongoing. |
| 4. File quarterly OSS return | Broken down by member state of consumption. | Accountant: €600–€2,000 per filing. 4 filings/year. |
| 5. Remit VAT | Single payment to your state of identification, redistributed by them. | Cash — between collection and remit, you hold the VAT. |
Total compliance overhead for the EU alone: roughly €20k–€40k/year if you outsource it, plus 4–8 finance hours/month. That doesn't count the registrations you'll need separately for some VAT-on-services regimes (Norway, Switzerland, Iceland) that aren't in the OSS scheme.
UK VAT after Brexit
The UK left the EU's OSS scheme on 1 January 2021. You now register separately with HMRC. The good news: there's an £85,000 distance-selling threshold for goods. The bad news: for digital services to UK consumers, the threshold is £0. First sale triggers registration.
The UK's VAT rate is a flat 20%. Returns are quarterly. Late filing penalties start at £200 and escalate quickly under MTD (Making Tax Digital) rules.
Brexit also broke a quiet thing many founders relied on: pre-2021 you could just register in Ireland and call the whole EU+UK done with one filing. That stopped working four years ago. You need two registrations now, minimum.
India GST: the 18% surprise
India is the regime that catches the most US AI companies off guard, because India's Online Information and Database Access or Retrieval (OIDAR) rules apply to any foreign supplier selling digital services to Indian consumers, with no threshold. The rate is 18% (CGST + SGST or IGST, depending).
Compliance requires:
- Appointing an authorised representative in India.
- Registering under the OIDAR regime (GSTR-5A).
- Monthly returns. Not quarterly. Monthly.
- Reverse charge applies for B2B with valid GSTIN — but you need to verify the GSTIN, which the government API does, but it's your job to call it.
Penalty for failing to register: ₹10,000 or 10% of the tax due, whichever is higher, plus 18% interest per annum on unpaid tax. Indian consumer purchases of AI tools went up roughly 6× from 2023 to 2026; if your product is popular in India, your unrecognised GST liability is likely your second-largest indirect tax exposure after the EU.
Australia and New Zealand GST
Australia: 10% GST on digital services to Australian consumers, threshold A$75,000 in annual sales into Australia. Quarterly returns. New Zealand: 15% GST, threshold NZ$60,000. Quarterly returns.
Both regimes apply to non-resident suppliers. Both require registration before the threshold is crossed (you forecast it; if you wrongly forecast under, you owe retroactively). Both are well-administered and the registration process is, frankly, much simpler than the EU. They still cost an accountant 4–6 hours per filing.
What it actually costs to comply yourself
Pulled from real numbers across 14 AI companies we've helped migrate. Annual in-house compliance cost for a $5M ARR AI company selling to EU, UK, India, AU, NZ:
| Line item | Annual cost |
|---|---|
| EU fiscal rep + OSS filings | €18k–€32k |
| UK HMRC filings (4 quarterly) | £3k–£6k |
| India OIDAR rep + monthly filings | ₹450k–₹800k (~$5k–$10k) |
| AU + NZ filings | A$4k + NZ$3k (~$5k) |
| Stripe Tax (0.5% of GMV on $5M) | $25,000 |
| Fractional finance / tax counsel time | $12k–$24k |
| Total | ~$70k–$110k/yr |
And that's before the cost of one missed registration (typically $5k–$30k in penalties + interest + accountant time to clean up) or one audit (median resolution cost in our sample: $42,000).
The MoR shortcut
A Merchant of Record collapses everything above into a single line item on your P&L. Macropay holds the registrations, files the returns, remits the tax, and carries the audit risk in all the jurisdictions above and several more (Norway, Switzerland, the UAE, Singapore, Brazil OIDAR, Mexico digital services tax, South Korea).
On a $5M ARR business, the math:
| DIY (Stripe + Stripe Tax + fiscal reps) | Macropay MoR | |
|---|---|---|
| Payment processing | $145k | $225k |
| Tax / compliance overhead | $70k–$110k | Included |
| Engineer-months on tax code | 2–4 per year | 0 |
| Audit liability on books | Yours | Ours |
| Total cost | $215k–$255k | $225k |
At $5M ARR, the run-rate is a wash. The liability transfer is not. Below $5M ARR, the MoR option is meaningfully cheaper than DIY — and the time you save is time you spend shipping product instead of arguing with HMRC about a missing quarterly return.
We registered in 21 countries on our own first. It took our two-person finance team a year. The second time, we moved the whole stack to Macropay in a weekend.— Lina Okafor, VP Finance, Nimbus AI
If you're curious where you stand, our calculator lets you flip the "all-in (with intl, FX, tax, disputes)" toggle and see the line-by-line breakdown of what compliance is actually costing you on Stripe Tax today versus a flat MoR rate.