SAAS contract

Software as a service (SaaS) is a software distribution model in which the service provider makes software available to users through a web browser or application by deploying the software in cloud.

Users do not download or upgrade the back-end to their device (computer, smartphone, tablet), cannot copy and distribute it, and therefore only use the software functionality online. Users work with the front-end and, accordingly, can set settings related to access to such a service. SaaS is beneficial so, on the one hand, it prevents piracy (unlicensed use), and, on the other hand, the software is centrally updated and access is possible from any device.

In practice, many questions arise about the legal formalization of relations in SaaS, since  the software is an object of copyright and is protected as a literary work

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    There are many variants – service agreement, consigment agreement, license agreement, mixed agreements. Moreover, most of all SaaS contracts are concluded as license agreements and provide the user with a license to use the service provider’s software. This approach has the right to existence, but still, considering the legal nature of SaaS, it does not seem entirely reasonable.

    In each case, the task of VigoLex lawyer is to assess the features of the project and select the most optimal contractual structure to maximally protect the interests of the parties.

    The next important issue related to SaaS is the taxation of such activities. The owner of the software (for example, email service, marketplace) and the client are often located in different jurisdictions, which entails difficulties in paying taxes. Firstly, it is necessary to determine where taxes are paid (in the country of incorporation or in the country where the service is provided). Secondly, some states regard SaaS entirely as a service, while others – as an instance of software delivery. Accordingly, the regulation depends on it.

    VigoLex specialists, who have accompanied more than a dozen successful SaaS projects and also have good expertise in tax planning, will help to understand all the legal nuances.

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