# Octobat official blog
## [Our mission](https://blog.octobat.com/our-mission)
When we started Octobat, our vision was to build an ultra-fast, one-click, and compliant integration with all payment gateways in order to create invoices for every online transaction. We have expanded this vision to offer seamless tools that will allow online sellers to simplify the tax reporting, accounting consolidation and to speed up the tax filing process in a unique and user-friendly interface.
## 🇮🇪[ Ireland cuts VAT rate from 23% to 21% for 6 months](/product/ireland-cuts-vat-rate-from-23-to-21)
Due to the COVID-19 crisis, Ireland announced that the domestic *VAT* rate will be cut from 23 to 21 percent from September 1, 2020 to February 28, 2021. This article summarizes how Octobat is handling this update, to help you to stay compliant without lots of headaches... [Read more](/product/ireland-cuts-vat-rate-from-23-to-21)
## 🇩🇪 [Germany cuts VAT from 19% to 16% until 31 Dec 2020](/product/germany-vat-rate-cuts-july-1)
Due to the COVID-19 crisis, Germany announced that *VAT* will be cut from 19 to 16 percent from July 1 to December 31 this year. This article summarizes how Octobat is handling this update, to help you to stay compliant without lots of headaches... [Read more](/product/germany-vat-rate-cuts-july-1)
# Our mission
empower online stores with an automatic, smart, and compliant billing system.
## **When we started Octobat, our vision was to build an ultra-fast, one-click, and compliant integration with all payment gateways in order to create invoices for every online transaction. We have expanded this vision to offer seamless tools that will allow online sellers to simplify the tax reporting, accounting consolidation and to speed up the tax filing process in a unique and user-friendly interface.**
**Our story began in 2014 in the heart of Paris when Gaultier Laperche and Nicolas Guillemain, two childhood friends who had already worked together for some years in the creation of web projects and e-commerce sites, met some other startup entrepreneurs folks at The Family, a type of accelerator and VC for Parisien startups. They quickly felt the lack of adapted solutions for these entrepreneurs who were developing great concepts in the rapidly growing French but also European tech ecosystem.**
**We radically reduced the scope of PSPs and developed a direct integration with Stripe (a solution growing in popularity in the global startup ecosystem at that time) in order to create an instant post-transaction invoice issuing solution. After signing our firsts customers that were mainly entrepreneurial friends developing SaaS products, we realized that these types of businesses would face a new challenge within the EU due to the new set of VAT and invoice rules that came into force in 2015 and that concerned digital services selling across the continent - the VAT MOSS scheme.**
**After Gaultier and Nicolas built a mold that has successfully proven a strong market fit and has been able to sell itself in SaaS mode, Fernando Diez joined us in 2017 to strengthen the team and develop the sales and our partnership.**
**As we’re always looking for learning and growing, during the Covid crisis in 2019 we quickly realized that the new platform and marketplace model was booming and that there would be a growing need for a billing solution for platforms and marketplaces that could comply with the new VAT rules coming into place in July 2020. This was a complicated problem to solve and that no one in the market had proposed a solution - We launched Octobat Plaza: a set of APIs that allows platforms and marketplaces to onboard sellers and produce invoices in their name and on their behalf while respecting European regulations.**
**Today Ricoh, Blade, Soundiiz, Sweet Inn, Déménager Facile, Glassnode, Ultra, and 300+ other internet companies across Europe, Nord America, and Asia, use Octobat solutions not just to add automation to their billing flows, but to improve the user payment experience by reducing friction and improving compliance. It is a great achievement to work with these fast-growing companies and be part of their key to success.**
**And this is just the beginning!**
## **Confounders’ Bio**
**Gaultier has been involved in web development since he started to learn programming in high school. In 2009, he graduated from Telecom Paris with a master's degree and started working as a freelancer alongside Nicolas, a friend of his from high school, to help French SMEs in their digitization process. After a failed startup launch in the social-local market, and realizing that the B2B-SaaS market was booming, they decided to launch Octobat in 2015 during an entrepreneurship program at TheFamily. At Octobat, he is mainly responsible for the product strategy and technical development, maintenance, and support.**
**Gaultier loves skiing, running, cooking, wine, craft beers, and Italy.**
**Fernando is originally from Venezuela where he obtained his master’s degree in electronics and computers. He arrived in France in 2010 to study at the Ecole des Mines de Paris. After a stint in the oil & gas and energy industry, he started his own consulting firm in computer engineering in the automotive and aerospace sector. He met Nicolas and Gaultier in 2017 and joined Octobat following a training program for startup entrepreneurs at The Family, a Parisien startup accelerator where Octobat was actually founded.**
**Just like Gaultier and Nicolas, Fernando is a multi-sports lover. He frequently practices cycling and running (on the road and in the mountains).**
**Nicolas studied computer science and quickly became a freelance developer in 2007.Soon after, he co-founded with Gaultier the company Zuuno, a web service provider for SMEs based in Paris. In 2015, Gaultier and Nicolas created and launched the first version of Octobat on behalf of The Family where he followed a training program for entrepreneurs called Koudetat. Nowadays, Nicolas is responsible for the marketing aspect at Octobat, and helps Gaultier and Fernando with development and sales respectively.**
**He has a particular lifestyle as he decided to live in a van around France and Europe. The goal is to combine travel, work, and sports in the wilderness.**
# Create a payment link with Beanie
Discover Beanie links - a secured solution to create payment links without any technical knowledge. Share it on your favorite social media or send it to your customers via SMS, Whatsapp, email...
Beanie Links is an effortless, quick but yet professional solution to create unique or reusable payment links that can be shared on your favorite social media or messaging platform.
{% hint style="success" %}
Beanie is an Octobat integrated solution that also helps you handle taxes and invoicing automatically
{% endhint %}
Beanie links can be especially useful for those who promote their services and products outside of an e-commerce website. For example, freelancers, small businesses, and content creators using Instagram and Facebook stories to promote their products.
#### How do Beanie Links work?
Beanie payments are processed by Stripe. This means that you must first integrate your Octobat with your Stripe for creating a Beanie link. If you haven't yet, you can [create an octobat account here](https://auth.octobat.com/users/sign_up). Note: Beanie Links and Stripe are only available for businesses, you cannot activate an account if you are an individual.
#### What are the advantages of Beanie Links?
* Accept Credit card and Sepa SEPA payments (only in the EU)
* Accept One-time payment
* Accept Recurring payments
* Calculate taxes automatically (powered by Octobat)
* Issue and send compliant invoices at every sale (powered by Octobat)
### Creating a Beanie links
Before starting you must integrate Octobat and Stripe. If you haven't yet, [please check this tutorial.](https://www.youtube.com/watch?v=oFxno6KZbA0\&t=58s\&ab_channel=FernandoDiez)
**Step 1:** Go to your Stripe dashboard and under the "Products section" add your products to sell.
Set the product name:
Set the product price and recurrence. Beanie Links support both one-time and recurring payments:
**Step 2:** Go to your Octobat dashboard and create a *Beanie Configuration.*
{% hint style="danger" %}
A *Beanie Configuration* is mandatory for creating Beanie links
{% endhint %}
Under the Configuration section, go to the *collect payments* tab and then go to *Beanie configurations.*
Then you must *Add a Beanie configuration*
First, you need to give it a name, you can choose your preferred theme color, and ⚠️very important to set your ✅success and ❌cancel payments URL.
Now you need to continue to set the following parameters:
1. Set your tax calculation option:
a. *tax inclusive:* The tax will be calculated and then deducted from the payment and after this actually occurs.
b. *tax exclusive:* The tax will be calculated during checkout and the final price will change depending on the tax rate.
2. Validate the tax number: when it comes to B2B sales, Beanie can validate the tax IDs based on the number validity or the format compliance.
3. Accept coupons?: Tick yes if you want to validate during the checkout the coupons that you've created on Stripe.
4. Saving payment methods options.
5. The Billing address phone number collection options.
Now your *Beanie Configuration* appears on your *Configuration list*
**Step 3:** Go to your Octobat dashboard and create a *Beanie Link.*
Now that your Beanie configuration is set, you're ready to create your Beanie link. First, you need to go to the Configuration section, then on the *Collect Payments* tab, and finally go to *Beanie links*.
Then you must add a Beanie Link.
Now you need to go back to your Stripe Dashboard and look for the product that you want to sell and bind it to your Beanie link using the product's API ID code:
Go back to the Beanie Links configuration and do the following steps:
1. Set a title on your link.
2. Copy and paste the product API ID from Stripe into the SKU/Plan ID Field.
3. Select the Beanie configuration that you've created on Step2.
Click Save and that's it! You're Beanie Link now appears on the Beanie Link list so that you can copy and paste the URL and share it with all your customers.
# Product
Here are the articles in this section:
{% content-ref url="/pages/-MGmRhTns4RszlK06\_M9" %}
[🇮🇪 Ireland cuts VAT rate from 23% to 21%](/product/ireland-cuts-vat-rate-from-23-to-21)
{% endcontent-ref %}
{% content-ref url="/pages/-M9YOouh5\_K\_jTA7c4Ww" %}
[🇩🇪 Germany cuts VAT from 19% to 16%](/product/germany-vat-rate-cuts-july-1)
{% endcontent-ref %}
# 🇮🇪 Ireland cuts VAT rate from 23% to 21%
Due to the COVID-19 crisis, Ireland announced that the domestic VAT rate will be cut from 23 to 21 percent from September 1, 2020 to February 28, 2021. Learn how Octobat is handling this update.
On August, Ireland has announced a COVID-19 package including a cut in the standard VAT rate from 23% to 21%, for a period of 6 months, starting from the 1st of September, ending on the 28th of February, 2021.
Octobat customers selling from and to Ireland are impacted by this change as the tax rate cut must be reflected in their transactions. Here is our plan to help you to automate this migration depending on your case.
## Octobat's automation solutions
{% hint style="danger" %}
If you are using the "specific tax rate" feature in Octobat, please refer to the [next paragraph](/product/ireland-cuts-vat-rate-from-23-to-21#particular-cases-specific-tax-rate-and-hard-coded-api-rates)
{% endhint %}
### One-off charges and new subscriptions
Octobat has already implemented the new standard (21%) VAT rate so that calculations performed from September 1st will be automatically bound to the new percentages.
That means that every time our algorithm detects that Irish VAT should be applied for a given transaction or sub-item, the new percentages will be applied, no matter if the resulting billing scheme is tax-inclusive or tax-exclusive.
These updates will ensure an automated, hassle-free, and perfectly compliant solution for businesses using:
* Beanie
* Direct integrations
* The Tax Calculation APIs (Tax Evidences)
* The Octobat Dashboard
### Existing subscriptions, renewals and trial-endings
If you have existing subscriptions on Stripe, depending on how they are set up, Octobat may update them on your behalf in order to make sure that new tax rates are applied. Below are the different cases you may encounter, and why you have basically nothing to do on your own. We're here to help:
#### Tax-inclusive automatic subscriptions
If you never used the Stripe TaxRate APIs, you probably rely on Octobat to calculate tax accordingly every time a transaction occurs. The Stripe Plan's price is always the final price paid by the customer, as it's per definition, tax-inclusive.\
Octobat does not have to perform any update in that case, as tax is calculated on a post-payment basis.
Before September 1st, here is what happens, for a €100 recurring plan:
| Plan Amount | Charged Amount | Calculated VAT rate | Revenue | VAT |
| ----------- | -------------- | ------------------- | ------- | ------ |
| € 100 | €100 | 🇨🇮23% | €81,30 | €18,70 |
And starting on September 1st, here is what will happen, for the same €100 recurring plan:
| Plan Amount | Charged Amount | CaclulatedVAT rate | Revenue | VAT |
| ----------- | -------------- | ------------------ | ------- | ------ |
| € 100 | €100 | 🇨🇮21% | €82,64 | €17,36 |
{% hint style="danger" %}
Octobat will never update your plans nor tweak your subscriptions. If you want to decrease your prices due to the VAT cuts, you need to create new plans and subscribe to your customers on your own.
{% endhint %}
#### Tax-inclusive subscriptions with the Tax Rates API:
In that case, you are probably calculating taxes before the subscription is set up, and are using the Stripe Tax Rates APIs to reflect these calculations. Octobat will listen for renewals, and updates the subscription accordingly, using a 21% tax rate. The final price paid by the customer won't change, but this ensures that the invoices we generate are reflecting the tax rate cuts.
The change will be performed only on renewal. We are listening to the Stripe `invoice.created` event webhooks, so the VAT rate cut is reflected one hour before the payment actually occurs.
Before September 1st, here is what happens, for a €100 recurring plan:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | ------ |
| € 100 | 23% (inclusive) | € 100 | €81,30 | €18,70 |
And starting on September 1st, here is what will happen, for the same €100 recurring plan, after the subscription is updated:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | ------ |
| € 100 | 21% (inclusive) | € 100 | €82,64 | €17,36 |
#### Tax-exclusive subscriptions with the Tax Rates API:
In that case, you are probably calculating taxes before the subscription is set up, and are using the Stripe Tax Rates APIs to reflect these calculations, so the customer is paying the right plan amount + VAT on a recurring basis.\
Octobat will listen for renewals, and updates the subscription accordingly, using a 21% tax rate. In that case, **the final price paid by the customer** **will change.**
The change will be performed only on renewal. We are listening to the Stripe `invoice.created` event webhooks, so the VAT rate cut is reflected one hour before the payment actually occurs.
{% hint style="info" %}
**Customers using Beanie in tax-exclusive mode are also concerned by this change.**
{% endhint %}
Before July 1st, here is what happens, for a €100 recurring plan:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | --- |
| € 100 | 23% (exclusive) | €123 | €100 | €23 |
And starting on July 1st, here is what will happen, for the same €100 recurring plan, after the subscription is updated:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | --- |
| € 100 | 21% (exclusive) | €121 | €100 | €21 |
## Particular cases: Specific tax rate and hard-coded API rates
Businesses using the specific tax rate setting in Octobat in order to reflect the Irish 21% VAT rate for every transaction must update this setting in the [Configuration > Taxes > Tax Settings](https://app.octobat.com/tax_settings) as follows: (Specific tax rate must be changed from 23% to 21%).
API users that do not use the Tax Evidence API endpoint, but rather hardcode the tax percentage (`applied_rate` parameter) when creating items must also update their code accordingly.
## February 28th, 2021 planned reversal
The boost measure is scheduled to end on Feb. 28th, 2021, resulting in VAT rates getting back to their pre-September 1st percentages. Octobat has already implemented the scheduled updates and will monitor closely the situation if any update or delay should occur.
# 🇩🇪 Germany cuts VAT from 19% to 16%
Due to the COVID-19 crisis, Germany announced that VAT will be cut from 19 to 16 percent from July 1 to December 31 this year. Learn how Octobat is handling this update.
On June 4th, Germany has announced a €130 billion COVID-19 package including a cut in the standard VAT rate from 19% to 16%, starting from 1 July and ending on 31 December 2020. The reduced VAT rate of 7% will also be cut to 5%.
Octobat customers selling from and to Germany are impacted by this change as the tax rate cut must be reflected in their transactions. Here is our plan to help you to automate this migration depending on your case.
## Octobat's automation solutions
{% hint style="danger" %}
If you are using the "specific tax rate" feature in Octobat, please refer to the [next paragraph](/product/germany-vat-rate-cuts-july-1#particular-cases-specific-tax-rate-and-hard-coded-api-rates)
{% endhint %}
### One-off charges and new subscriptions
Octobat has already implemented both standard (16%) and reduced (5%) new VAT rates so that calculations performed from July 1st will be automatically bound to the new percentages.
That means that every time our algorithm detects that German VAT should be applied for a given transaction or sub-item, the new percentages will be applied, no matter if the resulting billing scheme is tax-inclusive or tax-exclusive.
These updates will ensure an automated, hassle-free, and perfectly compliant solution for businesses using:
* Beanie
* Direct integrations
* The Tax Calculation APIs (Tax Evidences)
* The Octobat Dashboard
### Existing subscriptions, renewals and trial-endings
If you have existing subscriptions on Stripe, depending on how they are set up, Octobat may update them on your behalf in order to make sure that new tax rates are applied. Below are the different cases you may encounter, and why you have basically nothing to do on your own. We're here to help:
#### Tax-inclusive automatic subscriptions
If you never used the Stripe TaxRate APIs, you probably rely on Octobat to calculate tax accordingly every time a transaction occurs. The Stripe Plan's price is always the final price paid by the customer, as it's per definition, tax-inclusive.\
Octobat does not have to perform any update in that case, as tax is calculated on a post-payment basis.
Before July 1st, here is what happens, for a €100 recurring plan:
| Plan Amount | Charged Amount | Calculated VAT rate | Revenue | VAT |
| ----------- | -------------- | ------------------- | ------- | ------ |
| € 100 | €100 | 🇩🇪19% | €84,03 | €15,97 |
And starting on July 1st, here is what will happen, for the same €100 recurring plan:
| Plan Amount | Charged Amount | CaclulatedVAT rate | Revenue | VAT |
| ----------- | -------------- | ------------------ | ------- | ------ |
| € 100 | €100 | 🇩🇪16% | €86,21 | €13,79 |
{% hint style="danger" %}
Octobat will never update your plans nor tweak your subscriptions. If you want to decrease your prices due to the VAT cuts, you need to create new plans and subscribe to your customers on your own.
{% endhint %}
#### Tax-inclusive subscriptions with the Tax Rates API:
In that case, you are probably calculating taxes before the subscription is set up, and are using the Stripe Tax Rates APIs to reflect these calculations. Octobat will listen for renewals, and updates the subscription accordingly, using a 16% tax rate. The final price paid by the customer won't change, but this ensures that the invoices we generate are reflecting the tax rate cuts.
The change will be performed only on renewal. We are listening to the Stripe `invoice.created` event webhooks, so the VAT rate cut is reflected one hour before the payment actually occurs.
Before July 1st, here is what happens, for a €100 recurring plan:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | ------ |
| € 100 | 19% (inclusive) | € 100 | €84,03 | €15,97 |
And starting on July 1st, here is what will happen, for the same €100 recurring plan, after the subscription is updated:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | ------ |
| € 100 | 16% (inclusive) | € 100 | €86,21 | €13,79 |
#### Tax-exclusive subscriptions with the Tax Rates API:
In that case, you are probably calculating taxes before the subscription is set up, and are using the Stripe Tax Rates APIs to reflect these calculations, so the customer is paying the right plan amount + VAT on a recurring basis.\
Octobat will listen for renewals, and updates the subscription accordingly, using a 16% tax rate. In that case, **the final price paid by the customer** **will change.**
The change will be performed only on renewal. We are listening to the Stripe `invoice.created` event webhooks, so the VAT rate cut is reflected one hour before the payment actually occurs.
{% hint style="info" %}
**Customers using Beanie in tax-exclusive mode are also concerned by this change.**
{% endhint %}
Before July 1st, here is what happens, for a €100 recurring plan:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | --- |
| € 100 | 19% (exclusive) | €119 | €100 | €19 |
And starting on July 1st, here is what will happen, for the same €100 recurring plan, after the subscription is updated:
| Plan Amount | VAT rate | Charged Amount | Revenue | VAT |
| ----------- | --------------- | -------------- | ------- | --- |
| € 100 | 16% (exclusive) | €116 | €100 | €16 |
### Reduced-rate updates
Octobat will apply the same rules for the German reduced VAT rate cut from 7% to 5% as well.
## Particular cases: Specific tax rate and hard-coded API rates
Businesses using the specific tax rate setting in Octobat in order to reflect the German 19% VAT rate for every transaction must update this setting in the [Configuration > Taxes > Tax Settings](https://app.octobat.com/tax_settings) as follows:
API users that do not use the Tax Evidence API endpoint, but rather hardcode the tax percentage (`applied_rate` parameter) when creating items must also update their code accordingly.
## December 31 planned reversal
The boost measure is scheduled to end on Dec. 31st, 2020, resulting in VAT rates getting back to their pre-July 1st percentages. Octobat has already implemented the scheduled updates and will monitor closely the situation if any update or delay should occur.
# EU VAT rules and updates
# 🇪🇺 New VAT rules - The one-stop shop (OSS)
The European Union e-commerce VAT package will take place on July 1, 2021. Therefore, businesses will have to deal with both the changes related to Brexit and the impact of the technologies in cross-border sales - two new sets of rules for VAT reporting in 2021.
### Dealing with B2C goods and services after July 1, 2021
From July 1, 2021, the EU will introduce new rules that will extend the Mini One Stop Shop (MOSS) currently available for accounting for VAT on B2C sales of telecommunications, broadcasting, and electronic services (TBES) to all B2C supplies of services where VAT is due in a Member State other than where the supplier is established and for intra-community B2C supplies of goods. This system, known as the "One Stop Shop" (OSS), was due to come into force on January 1, 2021.
### How will the OSS work?
The current distance selling thresholds will be abolished and all intra-Community supplies of TBES B2C services, as well as intra-Community distance selling of goods, will operate under the same threshold of € 10,000 limit. When this limit is exceeded, VAT will be due in the Member State of supply, regardless of the level of sales in that country. It is important to note that this threshold applies to businesses established in the EU and will not apply to UK businesses.
Any VAT due can be returned via a single VAT return, submitted in the Member State of identification - the country in which the business is registered for OSS. Any company established in the EU will use the country in which it operates as the Member State of identification. If there is no business establishment in the EU, then a Member State can be chosen. Provisions also apply to non-EU companies that provide services in the form of the non-Union OSS scheme. The OSS scheme is not compulsory - businesses can choose to be registered in all Member States where VAT is due.
### The "Union scheme" - goods shipped from inside the EU
The shipment of goods from physical locations, such as warehouses in the EU, will continue to be treated as distance selling. If the thresholds are exceeded, VAT will be due in the Member State of supply.
Therefore, OSS will be available for all sales of goods, regardless of their value. VAT will be returned in the Member State of identification at the rate in force in the country where VAT is due - the Member State of consumption. Any VAT due will be paid to the Member State of identification, and OSS declarations will have to be submitted.
### Import OSS (IOSS) - goods shipped from outside the EU
Goods imported from non-EU countries or territories to EU customers up to an intrinsic value of €150 will be covered by an import regime, such as that to be implemented in the UK from January 1, 2021. This import regime comes with the abolition of the current VAT exemption for goods in small consignments up to a value of 22 euros. However, if the value of the goods exceeds €150, VAT cannot be accounted for under the IOSS scheme and a full customs declaration will be required.
### The impact for Marketplaces and platforms
Goods imported from territories or third countries in batches with an intrinsic value of less than €150 using an electronic interface such as a marketplace, platform, or similar means, will also be treated differently. For imports not exceeding €150, instead of the import VAT, the marketplace will charge the VAT to the customer at the point of sale and account for it instead of the seller.
### So, what will happen in July 2021?
Until the application of the new rules on July 1, 2021, Member States must transpose into their national legislation the new rules of the VAT Directive that is already in force, something that some Member States have already done. Although this has not yet been confirmed, many believe that the OSS could be delayed further, as the Netherlands and Germany are uncertain about the preparation for the start date of July 2021.
For British companies, Brexit makes things particularly complicated. After the implementation of OSS, British companies can benefit from the changes to the e-commerce package. However, during the 6-month period in 2021, registrations and tax representatives may be required for a relatively short period of time. It is essential that companies plan their supply chain taking into account all the changes ahead.
# 🇪🇺 The EU Intra-community VAT 'reverse charge' mechanism
Generally, VAT is collected from customers by vendors for remittance. Sometimes it is the customer himself who returns the VAT to the tax authorities: this is the 'reverse charge' principle.
### 🇪🇺🇮🇹🇩🇪🇦🇹🇧🇪🇧🇬🇨🇾🇨🇮🇭🇷🇩🇰🇪🇸🇫🇮🇫🇷🇬🇷🇭🇺🇪🇪🇫🇮🇱🇻🇱🇹🇱🇺🇲🇹🇳🇱🇵🇱🇸🇰🇷🇴🇸🇮🇸🇪🇨🇿
### What is the Intra-community VAT 'reverse charge' mechanism?
The VAT reverse charge mechanism consists of reversing the VAT taxpayer. In principle, VAT is invoiced by the service provider or vendor who collects it and remits it to the State Treasury. The reverse charge moves the responsibility from the vendor, who invoices net of tax, to the buyer of the good or service who will record and return the VAT to the tax authorities.
This mechanism has been set up to regulate the legal framework for VAT in the context of transactions between business sellers and buyers subject to the payment of VAT in the EU.
The reverse charge is a rule in use between all the countries of the European Union but this mechanism also exists for foreign companies located outside the European Union.
### **Who is affected by the VAT reverse charge?**
The reverse charge mechanism applies only in the context of business to business supplies of goods and services. European companies are concerned by this mechanism if they:
* Buy goods to companies located in other EU states and abroad.
* Purchase a service from companies located in other EU states and abroad.
* Deliver goods for themselves.
{% hint style="success" %}
Let's take a concrete example: a company based in Germany sells a certain amount of goods and services to a Spanish company. The invoice issued by the German supplier must theoretically mention the Spanish VAT rate at the applicable amount. The reverse charge mechanism for intra-Community VAT allows him to invoice a tax-free amount to his Spanish customer, specifying that the latter will have to pay VAT in his country. It is therefore the Spanish company that will pay its own VAT directly to the Spanish Tax Authorities.
{% endhint %}
### How to apply VAT reverse charge in the EU?
Companies that sell goods or services under the reverse charge mechanism need to get their customer’s VAT number. That number has to be genuine and verified, making sure that the goods or services are purchased for business purposes.
When a company makes a sale of specific goods or services to a customer who is not registered for VAT or is not likely to be registered for VAT in a country of the EU, the reverse charge procedure does not apply. In this case, VAT must be applied in the usual way.
Octobat helps you by verifying the validity of your customer's VAT number in order to automatically apply the reverse charge mechanism and issue the invoices under the EU requirements - including the obligatory mentions on these. Octobat also allows a better follow-up and a simplification of the reverse charge procedures by automatically generating VAT reports and EC Sales List (ESL) for a faster remittance.
# Strong Customer Authentication (SCA) is here
\#Strong Customer Authentication, #SCA, #compliance, #payments, #conversion, #checkout, #Beanie, #PSD2, #DSP2, #regulation, #3Dsecure
{% hint style="info" %}
On September 14, 2019, Strong Customer Authentication (SCA) will enter into force within the PSD2, and lots of businesses aren't well equipped to face it. Here is a quick tour of this new rule and a short guide to avoid annoying surprises.
{% endhint %}
### So what the heck is SCA?
In a few words, it’s a new European regulation that aims to better protect consumers when they pay online so they don’t get hurt. Coming into force on September 14, 2019, it will impact the whole [European Economic Area](https://en.wikipedia.org/wiki/European_Economic_Area) (EEA) (including the UK) and it takes place within the Payment Services Directive 2 (Directive 2015/2366) (PSD2).
### How will SCA impact European businesses?
SCA would deeply change the way online payments take place in order to improve their security. To do so, online sellers will need to ask online buyers for 2 of 3 authentication factors:
* Something they know (Password, PIN…)
* Something they have (Smartphone, Tablet…)
* Something they are (Fingerprint, face, or voice recognition…)
To avoid declined payments by customers’ banks and therefore supplementary frictions from conversion cutbacks, European digital businesses have to be carefully prepared.
### How to tackle SCA?
Here are three steps to respond to this new technological challenge.
First - *determine if your business is impacted.*
/ Is your business based in the European Economic Area? / Do you sell to customers in the EEA? / Do you accept card payments?
Second - *choose an SCA-compliant payment service provider and checkout process.*
The list of payment service providers is quite huge, but there are some solutions like Stripe or Ayden that are making strides in order to be SCA-proof.
Beanie, our hosted checkout page, allows you to automate the whole Stripe integration and set up a seamless workflow. In addition to handling SCA, you can implement a real-time sales tax, VAT and GST calculation and reporting.
Note: SCA applies when the payment is triggered by the payer, so SEPA payments are not involved as they are initiated by the payee and the payment mandates take place without any action from the payer.
Third - *Get it done before September 14*. After this date, the risk of experiencing declined payments from your customers’ banks is going to be very high. Don’t rest on your laurels, get going, and implement the technological solutions that will ensure your conversion by complying with SCA.
### How will subscription models be impacted?
For recurring businesses collecting payments through credit and/or debit cards, SCA will apply only with the first payment (the initial transaction). But then if the amount changes over time, 3D Secure would be required.
So yes, recurring revenue can be impacted and this represents a huge challenge for recurring businesses with fluctuating amounts (i.e. ‘flat fees + usage fees’ billing models). Fortunately, there is also good news! Recurring transactions are considered to be “payee initiated”, so these are exempt from SCA authentication requirements.
That means payments initiated by the merchant as well as ‘statistic amount recurring payments’ aren’t affected by SCA in most cases.
### Are businesses unaware of SCA?
It may be hard to believe but Mastercard research revealed that close to 75% of European online merchants are potentially unaware of the new SCA requirements coming into force this year. As of 14 September 2019, SCA requirements will be mandatory and online retailers need to be prepared before it arrives.
If you’re an online seller and have zero plans to support SCA yet, you should promptly ask your payment service provider to ensure your business is ready to support Strong Customer Authentication.
Aiming to ensure conversion and improve the payment experience for online customers, Octobat is launching [Beanie](http://octobat.com/) - a new robust and customizable hosted checkout page that improves the customer payment experience and brings real-time tax calculation - SCA-proof.
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