VAT (Value Added Tax)

VAT is a consumption tax. It is charged on goods and services at every stage of the chain, and in the end the private customer pays it. Businesses collect it and pass it on.

For an international entrepreneur the question is not whether VAT exists but where it applies. The place of supply rules decide: for digital services and many consumer sales, VAT follows the customer, not the seller.

That means a US LLC selling online courses to German customers has to deal with German VAT, or use the EU one-stop shop, regardless of where the company sits. Relocating the company does not relocate the VAT.

B2B sales inside the EU usually run under the reverse charge mechanism: the business customer accounts for VAT, you invoice without it. Outside the EU, many services are simply out of scope.

Under Flag Theory 3.0 this is why the business flag is chosen by client base, not by wishful thinking. A structure that ignores VAT looks cheap for 1 year and expensive at the first audit.

Where your sales trigger VAT registration and where they do not is a technical check we run with you before you set up the company.