In a nutshell: Companies don't give money away.

If you want money from companies, you have offer the trinity that suits their payment rules and habits: An order, an invoice, a payment.

What you sell doesn't have to make sense to the beancounters. They're used to that. But it has to be something they're able to order and pay for.

Because at least here in EU, you need an actual invoice for every expense that gets put into the accounting books. That expense can then be written off and doesn't count as "profit". Not having an invoice will make any EU-based company probably flatly refuse the payment due to how much accounting and revision issues that causes.

Having a proper invoice (client address, your company address, VAT number) makes life significantly easier for accounting department and thus makes paying money significantly more likely.

(There is also a lesson here for other US-based companies and conferences that can't produce a simple paper saying "Invoice" and a pair of addresses. Yes I'm looking at you 1Password.)

Having a VAT number in most EU countries has a fixed cost that is non-negligible.

For a realistic example in Italy, having a VAT number implies a minimal fixed yearly cost of ~300eur (combining all various expenses) even for zero income. If you already are an employee, any extra income is likely to be taxed higher and require extra bookkeeping, to the point that cost parity is only attained if you can invoice for at least 450-500 eur.

This is purely wasted money, without considering the extra work that you have to put into for the tax records.

It's simply not worth it.

It's not worth if you're making less than 300eur per year.

For any reasonable company (even a single founder one), 300eur is nothing

I don't think you understand the implication: there's no way to have a small, side passive income in the 0-10k range. This is a big stopper for many OSS developers that could bootstrap themselves.

With this limitation, many developers simply do not (and rightly so) put the effort in accepting anything in that ballpark because it's just extra work.

I agree. You could get payment without a vat number though

In this case, there are also rules for the amount of income you're allowed to get without a VAT.

I'm pretty sure in most EU countries the profitability of a service supported by patreon (that is, a passive income in sub 10k range) would be almost nullified if correctly accounted for taxation.

I had long discussions with friends about legally accepting money for side projects. It's a very hard topic to discuss.

I'd be curious to know if anybody in an EU country is able to legally accept and declare a side income and retain anything more than 30%.

You misunderstood me, I didn't imply that you need a VAT number as a seller company (as a US company you can't even have it), but just that you should be able to produce a simple invoice PDF with your address, buyer address, buyer VAT (if needed) and a sequential number to provide a paper we need to properly add payment into the accounting books.

And yes, I know that VAT isn't required piece of information on all invoices, but it WILL make the payment go smoother through the accounting departments which is what you want ;)

Some of those costs are general accountancy that you would have to do anyway, as long as you try to sell anything.

AFAIK the big problem with VAT, from a seller perspective, is the fact that most governments, knowing full well that 90% of businesses fail in the first 2 years, ask for big upfront payments on estimate VAT remittances in that window, to make sure they don't lose out. After 3 years, as long as your accountancy is correct, it should be smooth sailing.

At least in Italy, this is exactly the opposite. The first 5 years you are given a "relatively" easy start, giving you a false sense of the costs involved. After the 5 year mark, the costs suddenly becomes 5-7x, often making the company fail.

Is it possible to "restart" the company? Maybe with slightly different name :)

There are several ways to obtain a VAT number, but the most economical is by binding the company to an individual, which of course won't be able to do so.

There are other way to start companies that are not directly attached to a person, but this involves a much larger upfront capital, which is designed to avoid exactly this scenario.

Generally because of existing accountancy practices. In tiny companies, you can get away with it but any company of reasonable size will need a paper trail beyond "I donated to this guy as we use his free software"