VAT and invoicing for eSIM resellers

The two invoices nobody mentions

A reseller sits between two sales, and almost every guide to this business describes only one of them. Your supplier sells an eSIM to you. You sell an eSIM to a traveller. Those are two separate transactions with two separate tax treatments, and confusing them is how a first quarter-end goes badly.

The first invoice arrives. Airalo or Maya or eSIMTIME bills your account, usually from a company registered somewhere else, usually in dollars, usually with no local tax on it — because a service bought from abroad is generally handled by the buyer rather than the seller. The second invoice you have to produce, and it is the one with all the questions in it.

• Who issues it. The supplier issues theirs to you; nobody issues yours for you unless you have deliberately arranged that.
• What currency it is in. Your cost is usually in dollars and your price usually is not, so the two invoices do not net off cleanly.
• What tax is on it. The supplier’s invoice to you often carries none; yours to the traveller usually must.
• Which country decides. For your purchase, the rules of the country you are established in. For your sale, in most cases the rules of the country your customer is in.

Nothing on this page is tax advice, and no rate or threshold appears on it on purpose — those move, and a number that has gone stale is more dangerous than no number. What follows is the shape of the problem, so that the hour you buy from an accountant is spent on your situation rather than on explaining what an eSIM is.

The tax lands where the customer is

The rule that surprises people: for telecommunications and electronically supplied services sold to consumers, tax is generally due where the customer is, not where you are. Your company’s address does not decide it. Neither does where the eSIM is used, where your bank is, or where your platform is hosted. A traveller buying from a sofa in Berlin the night before a flight is a German sale, whatever the eSIM is for.

Read the second row again, because it is the one that describes an eSIM store. Your customers are travellers, which means they are the most geographically scattered customer base a small business can have. Thirty orders a month can be thirty orders from twelve countries, and nobody registers for tax in twelve countries over thirty orders. That gap — between where the tax is due and what a small seller can plausibly administer — is exactly what the schemes in the next section exist to close.

The EU’s One Stop Shop is the best-known of those schemes and the one your customers most often trigger. Sellers established outside the EU have their own version of it. Which one applies to you, and whether a registration threshold protects you at all, depends on where your company is — that is the first question to take to an accountant, not the last.

Three ways resellers actually handle it

In practice everybody ends up on one of three routes. They are not equally good, but each of them is the right answer for somebody, and the wrong one is usually chosen by accident rather than on purpose.

Sell only where you already file

Restrict the store to your own market: one language, one currency, one tax return, and a sentence in the terms saying who you sell to. This is the route almost every reseller should start on, and the one most of them skip past because selling worldwide sounds bigger. It is not a smaller business — a travel agency selling eSIMs to its own outbound customers is selling domestically to people who happen to travel, and that is a completely ordinary domestic sale.

Register, and file it yourself

Sell across borders and take on the filing: a one-stop registration where one exists, local registrations where it does not. The cost is not the tax — you collected that from the customer — it is the returns, the deadlines and the record-keeping. Software helps with the first half of the problem: Stripe Tax will work out what to charge a customer in a given country and put it on the payment. Working out what to charge is not the same as filing it, and the filing is the part that has a deadline.

Let somebody else be the seller

A merchant of record — Paddle and Lemon Squeezy are the two most people have heard of — becomes the legal seller to your customer. They charge the tax, they file it, and their name is on the receipt. It is a real answer and it has a real price: a percentage well above a card fee, less control over the checkout, and a customer relationship you now share. Check before you build anything that the one you are considering will take a telecommunications product at all; these companies were built for software licences, and not all of them want this category.

The honest ordering for most people is first route, then third, then second. Start where you already file. If foreign demand turns out to be real, a merchant of record buys you a year of not thinking about it. Registering and filing yourself is the cheapest per sale and the most expensive per hour, and it makes sense once the volume is big enough that a percentage of every sale costs more than an accountant does.

What the receipt has to say

Whichever route you take, a customer gets a document and you keep a copy. What has to be on it varies by country, but the list below is close to universal, and a receipt missing one of these is the kind of thing that is cheap to fix now and expensive to fix for four hundred past orders.

• Your legal name and tax number — the registered entity, not the store’s brand name.
• A document number and a date, in a sequence with no gaps in it.
• What was sold, in words a stranger can read: the destination, the data allowance and the validity, not just a product code.
• The amount before tax, the rate applied, the tax amount and the total — separately, even when the rate is zero.
• The currency, stated. A number with no currency next to it is a number two people can disagree about.
• Enough about the customer to show why that tax treatment was the right one — country at minimum, and their tax number when the sale was business-to-business.

Then there is the evidence question, which is specific to selling something a customer can buy from anywhere. If tax depends on where the customer was, you have to be able to say how you knew. The common standard is two pieces of evidence that do not contradict each other — a billing address and a card-issuing country, say, or a billing address and the country the payment came from. Your payment provider records some of this whether or not you ask; the point is to keep it attached to the order rather than have it sitting in a dashboard you might one day stop paying for.

This is the one place where the store software and the accounting software have to be told about each other. A storefront can produce a receipt and a record of what was sold; it is not a bookkeeping system and should not pretend to be. Decide early which system is the source of truth for what you sold, and export from it on a schedule.

Doing this before it gets expensive

None of this is hard in the first month and all of it is hard in the eighteenth, because by then there are orders to go back and reclassify. Five things, in this order, before you take the twentieth order.

1. Write down who you sell to. One country, one region, or anyone — as a sentence in your terms, not as an assumption. Everything else follows from this line.
2. Ask an accountant two questions: what I owe on what I buy from a foreign supplier, and what I owe on what I sell to a customer abroad. Take the supplier invoice and one of your own receipts to the meeting.
3. Make the checkout capture and keep the customer’s country, and store it on the order rather than only in the payment provider.
4. Fix the receipt template before there is a back catalogue of them. Renumbering issued documents is not a thing you get to do.
5. Put a calendar reminder on every filing deadline the accountant names, including the ones in other countries. Missing one is almost always an administrative failure rather than a money problem, and it is the cheapest failure to prevent.

And keep the two invoices apart in your own head. What your supplier charges you is a cost with its own tax treatment; what you charge a traveller is a sale with a different one. The margin you have worked out in a spreadsheet sits between them, and it is smaller than the spreadsheet says whenever one of the two has been forgotten.

• Choosing a payment gateway for eSIMs →
• Writing an eSIM refund policy →
• What your margin actually is →