Selling software worldwide from Europe

Once upon a time selling software worldwide was easy. You would have a PayPal account, sell your stuff without VAT applied, and at the end of the year you told the tax office how much you had sold in total. Now it is almost undoable, at least from Europe.

Why not go to the App Store?

“But hey, there are the App Stores, they take all the work off your hands.” That is partly true, at least for billing and taxes, but it comes with other drawbacks: a review for every single app version; a lot is forbidden in the App Store, technically and in terms of content; you know nothing about your customers; the fees are between 15 % and 30 %; you do get paid out in Euro, but at Apple’s own rate on the day of payout rather than the day of sale; and Apple can throw you out at any time — then go and try to take on a trillion-dollar corporation.

What is so complicated about it?

Selling things in your own country, in my case Germany, is comparatively manageable: you write an invoice with your country’s VAT and that is that.

But as soon as you sell to other EU countries, you have to apply (and know) the standard tax rate of the destination country for software sales. If your customer is a company, you can ask for their VAT identification number (VAT ID) and issue a “reverse charge” invoice, so without tax, and they take care of it. But if the VAT ID turns out to be wrong, you owe that amount to your tax office after all. Worldwide, every country then has its own rules again, and in some of them you have to remit the VAT directly in the destination country — that depends on minimum turnovers which can range from 0 to well into the hundreds of thousands.

In Europe there are fortunately exemptions — below 10,000 Euro of annual turnover in other EU countries you may simply charge your home tax rate — and otherwise the One-Stop-Shop (OSS) procedure. That at least saves you from reporting the taxes separately in every EU country, but you still have to know which taxes to charge. And that is not even uniform within a single country: Heligoland belongs to Germany, but for VAT purposes it counts as third territory (§ 1 (2) of the German VAT Act) — no German VAT applies there. The same goes for Büsingen am Hochrhein, the German enclave in the middle of Switzerland. Other EU countries have their own special zones. That is why the postal code is asked for everywhere. File it under useless knowledge ;)

How do I get my money?

Now we know how the invoice data has to look and how the taxes work. But we still have to get at the money as well. No problem, we will just use PayPal. But not everyone wants to or can use PayPal, and when PayPal gets into a really bad mood because a customer complained, they simply might close your account.

So let us take a payment provider — and there are fewer of them than you might think. The vast majority use Stripe, they are in on pretty much everything. To be fair: for a European merchant this runs through Stripe’s Irish entity and pays out in Euro. But as soon as a customer pays in a different currency it gets converted, and that costs around 2 %. And that is where the actual problem sits: we live here with the Euro, yet we fall back on providers whose internal reference currency is the dollar. Every station that converts takes a cut — and you are never the one setting the rate.

So we could pick a European payment provider like Mollie. But they really do nothing other than accept the money and charge fees for it. And when a customer reverses a payment without giving you the chance to make a refund, some payment methods will cost you more than 10 EUR right away — you end up paying on top.

But surely there is an easier way? Merchant of Record

You can save yourself a lot of that by using a so-called merchant of record (MoR). They then sell your software in their own name and on their own account. They take care of all tax matters and once a month you get the money transferred, minus the taxes and their fees.

I have been using Paddle from London for years and it really works quite well. You can even run everything in Euro, which avoids some losses. Their support is not particularly fast, but it works. You know all your customers and their data. But a MoR has rules too and does not sell everything. And you also have to trust that it will keep working.

Recently, though, the website for one of my products had to go through a second review for content reasons. That got sorted out and Paddle resolved it promptly — still, I took it as a reason to have a look around the MoR market. Just as a plan B for the worst case. And there are not nearly as many that really fit…

There are more MoRs than the ones I name here — what I was after is the pattern that runs through almost all of them: they are not based in the EU. Lemon Squeezy belongs to Stripe by now and is visibly drifting towards Stripe Managed Payments — I would not start there any more. FastSpring has been around since the early days and still looks like it. Both USA. And even the fresh Swiss startup tiun uses Stripe, so you end up half in the USA again.

A MoR from the EU would be good then. They do exist, just in two flavours: young and unfinished, or old and cut for corporations. Creem from Estonia only offers a small range of payment methods, not even PayPal, which roughly half of my buyers use. cleverbridge from Cologne and Nexway from France, on the other hand, have been doing this for over twenty years — but with an annual fee, pricing on request and a sales call instead of a signup form. That is nothing for a single developer. That leaves the hope of Vatly from the Netherlands with its Europe-first approach — so far only a waiting list, though.

In any case, what is left for small indie software vendors is pretty thin. You keep running into the same companies here: the alternative distribution channel Setapp, for instance, is intertwined with Paddle, and Stripe is everywhere too and even wanted to buy PayPal — over 50 billion dollars together with the investor Advent, PayPal’s board found it too little, and by the end of August 2026 the plans were off the table again.

Wishes

I have not even talked about legal aspects, e-invoicing and different currencies. It would be desirable if all of this were much simpler and more carefree. If the EU, in the interest of its citizens, would create the foundations for sole traders to sell software worldwide very easily, without having to dig deeply into it or depend on resellers, because doing it yourself is barely realistic. Then the world could move a little closer together again.

P.S.

Of course the topic got to me and I went and programmed my own little shop, with a checkout dialog and everything I had learned. Whether I will actually use it, I do not know yet…