Hey cm2012, I'm one of the cofounders of Lago (my business partner wrote this post).
Actually even if you're incorporated in the US, if you serve a client in EU for instance, the VAT rules of EU apply to how you're supposed to invoice your customer, beyond a certain transaction limit.
So... unless you're based in the US, and only serving US-based users, it gets complex very fast!
If you wire your dollars onto US soil, for a service performed in the US by US business, good luck getting the US legal system to enforce upon that US business whatever euro-cucked invoicing scheme is called for.
This doesn't matter. For B2B, if you don't show your EU customers a valid invoice, they simply cannot pay you.
It's not EU governments or post-purchase issues you have to deal, most of the time - it's trying to persuade a large accounting department to pay you unaccountable money. If you can't follow their invoicing requirements, it's just not going to happen.
Do people ever stop and wonder WHY in nations like Portugal the informal economy is roughly DOUBLE of say the US? When every invoice must be available to the government, what actually ends up happening is non-conforming invoices either get made up by the customer or the money magically flows out under some other auspice.
Making it literally illegal to accept an invoice that is legal in the country in which you obtained it borders on logic even my toddler can understand is absolutely begging for bad business climate or tax evasion.
What is the mechanism for French government to subpoena a non-EU business to find this invoice? If the customer (instead of vendor) produced an invoice that matched their bank statements and non-conforming receipt, hypothetically, would anyone really know the difference?
Probably they wouldn't as full audits aren't that common, but audits do happen and most accountants won't care about your purchase as much to personally commit a felony and forge documents for no good reason (accountants do have personal responsibility, and every accounting course reminds wannabe accountants that "the boss ordered it" is not an excuse) so they simply say that they can't/won't do it and if the vendor can't send a satisfactory invoice then they won't do business with that vendor.
How would a French audit uncover anything wrong with a conforming format invoice under the name of some random American company that exactly matched the bank statement, physical goods, and customs paperwork?
I don't think US has many relevant freedoms left. Some people cling very hard to legacy 18th century ones while the Moloch just gobbles up all the new ones stemming from progress.
That american exceptionalism approach will work with private citizen customers. With business customers, leaning back in the legal framework encouraging tax fraud will not fly. They just won't buy from you then.
That's why any US company wanting to do business in Europe either has an European subsidiary, or follows something that's compatible with EU invoicing schemes.
>. With business customers, leaning back in the legal framework encouraging tax fraud will not fly.
Yes which is why in nations like Portugal, where any business invoice may be subject to accountability to government, there totally isn't a massive informal (read: tax-evading) economy to deal with the fact that the government makes it literally impossible (at least in above words) to accept an invoice legal in the jurisdiction in which it was issued.
It's not illegal to pay an US company with an US invoice in the EU. (HN likes to invent problems where there aren't, and companies do that all the time). It is not even limited to the US, most other countries can't/won't follow the format.
However there might be extra steps in adding those invoices to their accounting. For example, when import, the buyer will be charged the import tax (instead of having it added to the invoice)
The informal economy of Portugal has nothing to do with the above btw since that has nothing to do with American invoices (and you can bet German rules are not much simpler) - not saying the bureaucracy isn't, most of the time, stupid. The US also has it fair share of stupid crap that people have to deal as well but it is "transparent" to most Americans.
You keep bringing this up and it's simply not true. The EU has a single set of VAT invoice requirements that applies across the EU (the MOSS invoicing standard). Any VAT invoice that satisfies these rules is legal in all EU countries (https://eur-lex.europa.eu/legal-content/EN/ALL/?uri=CELEX:32..., article 226).
My company does plenty of business with EU businesses and we use a single standard EU VAT invoice without issue.
It's not literally impossible - the simple solution to standard invoice being unacceptable is to issue a different invoice that matches the requirements, and almost every vendor is happy to do so in order to make the sale.
Also, the informal tax-evading economy relies on personal contacts and 'mutual understanding' - it's not easily accessible to a foreign vendor, and when foreign vendors do want to access that economy, it requires much more adoption of local customs than just making a different format of invoice.
Yes literally impossible to take something in a format legal in the US, that doesn't match the foreign requirements, based on European testimony above (the exact truth of which IDK).
Informal tax-evading (when the seller isn't evading, just the buyer) doesn't require personal contacts. This is just naïve thoughtless statement. It happens all the time. Example: business owner goes to Panama where they know no one. Buys a pallet of llama wool, seller gives a non-conforming receipt. Buyer goes back to France, imports the pallet as "cotton" and creates a fake invoice showing the Panamanian sold cotton. Seller then sells llama wool on the streets for cash, marking in the books that they sold "cotton" for significantly less. They then use the on-the-books "cotton" proceeds to buy a shit-wagon car or something, and fix it using the unrecorded cash on the side. They sell the now nice shit-wagon and record the proceeds as profit. Now all the money for the llama wool is accounted for.
Cross country tax-evading is only assured in this case to require personal contacts when the tax evading happens on _both_ sides. When it only happens on the EU side, there's no need for personal contacts on the US side.
> Buys a pallet of llama wool, seller gives a non-conforming receipt. Buyer goes back to France, imports the pallet as "cotton"
Customs catches him (distinguishing cotton from non-cotton is surprisingly easy, so is forged documents for invoicing and freight papers, especially given that Panama is an unusual country to export raw cotton - or raw wool - from), he is now in prison for 5 years for tax fraud and document forging, llama wool is confiscated and auctioned off to legitimate sellers.
Maybe you can come up with a better example then :) Here in the US pallets of cocaine regularly make it through customs. Our customs officers are generally one rung above high-school dropout. They'd generally be lucky to distinguish heroin from a pallet of sand, let alone cotton from wool.
Not in the export/import business myself, just passed through customs enough to see just how truly stupid and vapid these officers are, combined with the truly insane amount of import/export volume each one is responsible for. In the US distinguishing types of fabrics and ensuring various legal substances that look vaguely similar actually are what they say they are is near the bottom of the priorities list. I don't have a lot of experience with EU customs (except see last paragraph).
I know people want to believe customs is some highly intelligent caring group of individuals who are sleeplessly guarding the country and the purse in a carefully planned and executed manner with a fine-toothed comb. Anyone with this belief has probably never crossed an international border. In practice it's more like the mental equivalent of a 4 year old set loose with a completely unreliable "drug dog" that alerts on a grandma who is ruthlessly interrogated while one guy with llama wool and 10 pablo escabars pass on the other side.
I can recall one occasion where I stepped directly from fucking IRAQ into EU and not a single customs officer even looked at me. Not one. Just a stamp without a single question. I could have been carrying literally anything and no one cared. I could have been coming from Iraq for any reason and no one gave a fuck what that reason might be.
Yes. It would be even larger if US companies couldn't accept foreign invoices without being in a special format. Does tax evasion in the US somehow disprove tax evasion in Europe?
