What do tax authorities consider as business customers?

When you are looking to register for VAT/GST as a foreign provider of digital services, it is crucial to understand how to identify your customer base—whether it consists of B2B, B2C, or both. The jurisdictions in which you will need to register are influenced not only by your sales but also by the classification of your customers.

If you serve either B2C customers or both B2C and B2B, it is generally safe to assume that, depending on your sales volume, you will likely face VAT obligations in every country where VAT for foreign providers of digital services has been implemented.

However, when your business model is focused purely on B2B sales, VAT obligations may change. Many countries have introduced the reverse charge mechanism or similar provisions. This shifts the responsibility for VAT from the foreign provider to the local business, meaning that you would not have to register, collect, or remit VAT in these jurisdictions.

For countries where no reverse charge mechanism exists, a VAT obligation might arise, and these are the countries where you will need to consider registration and compliance.

Countries in Scope

Countries in which both B2B and B2C sales have a VAT obligation (i.e., there is currently no reverse charge mechanism in place) include:

• Barbados

• Ghana

• Indonesia

• Kenya

• Malaysia

• Mexico

• Nigeria

• South Africa

• Switzerland

• Vietnam

*Note: this list only includes countries in which Taxually and Stripe offer tax calculation services.

Identifying B2B Clients

Unfortunately, there are no globally harmonized regulations on how B2B clients should be identified for VAT purposes. Each jurisdiction may have its own method or criteria. Here are a few examples:

• South Africa: The business must provide its VAT registration number to be classified as a B2B customer.

• Japan: While VAT numbers are not typically used, it is common practice to indicate the business status of customers through contracts or agreements. Additionally, providers may verify business details such as corporate email domains.

• Canadian provinces: British Columbia, Manitoba, Saskatchewan: if the business is the end user of the service, provincial sales tax must be collected. If the service is for resale, the reverse charge mechanism applies.

Steps to Correctly Identify B2B Clients

To correctly identify B2B customers globally, we recommend following these key guidelines:

1. Request and Validate VAT Numbers: The first and most reliable method is to request the local VAT registration number of the customer and validate it through available means where possible (Note: Stripe Tax has extensive in-built validations).

2. Use Contracts and Invoices: Ensure that contracts and invoices clearly include proper business information, including the company name, business address, and any registration numbers.

3. Verify Business Identifiers: Utilize additional business identifiers such as official corporate payment methods, email domains, and self-declaration forms where relevant. This can help in cases where VAT numbers are not typically provided (e.g., Japan).

4. Request Business Certificates or Registration Numbers: In some jurisdictions, such as Japan, it may be necessary to request a business registration certificate or other official documents proving the customer’s business status.