Merchant of Record: Navigating Compliance

Merchant of Record: Navigating Compliance

With the global SaaS industry expected to reach $819 billion by 2030, the shift towards international cross-border sales is more relevant than ever. And this can only mean one thing. 

Business owners must quickly navigate evolving challenges and fuel global expansion before they miss out on this opportunity. To put it simply, the path to achieving this lies in forging a partnership with a trusted Merchant of Record (MOR), a solution different from all other financial service providers out there. 

To find out why that is and what the exact benefits are that this legal entity brings new to the table for SaaS and software companies, read our complete Merchant of Record guide

Of course, businesses can act as their own MOR, but the operational workload associated with accepting payments worldwide is huge. 

While numerous Merchant of Record options exist, not all are tailored to meet the specific needs of SaaS and software vendors like yourself. Choosing the right partner to successfully complete each payment process is the key to international success. 

And this journey starts with rules and regulations. 

So, let’s dive deep into the technicalities behind the MOR model, looking at: 

The 5 Regulation Types That Apply to MORs

Since the MOR processes online payments on behalf of a  business, taking on the legal liabilities and financial responsibilities associated with these transactions, it has to abide by specific regulations related to its core duties. After all, this is what it means to manage payments worldwide. 


Payment Processing Regulations: To ensure the correct and safe handling of sensitive payment information when processing payments, a Merchant of Record is subject to various compliance regulations, such as the Payment Card Industry Data Security Standards (PCI DSS) and the Payment Application Data Security Standard (PA-DSS). Additionally, MORs must comply with regulations mandated by credit card schemes such as VISA and Mastercard, which are constantly changing and must be fully understood.

Taxation Regulations: In order for MORs to accurately handle both international and local taxes, they must clearly know the different legal obligations specific to each jurisdiction in which vendors sell software, SaaS, and digital goods. This includes sales taxes, value-added tax (VAT), and income tax rules, as well as digital service taxes, which are becoming the norm in more and more countries.

Consumer Protection Laws: SaaS and software vendors and, by extension, Merchants of Record, as a result of an existing partnership, must adhere to fair trade practices, warranty regulations, refund and return rules, and customer disputes.

Privacy and Data Protection Practices: Merchants of Record are handling customer data, which makes them subject to different data protection and privacy laws, like the American Data Privacy Protection Act (ADPPA) in the US or the General Data Protection Regulation (GDPR) in the European Union. There are also the Personal Information Protection Law (PIPL) in China, the Personal Information Protection and Electronic Documents Act (PIPEDA) in Canada, and the General Law for the Protection of Personal Data, or the Lei Geral de Proteção de Dados Pessoais (LGPD) in Brazil.

Financial Regulations: Because Merchants of Record have a wider business and operational scope, they are also subject to financial regulations like anti-money laundering (AML) and know-your-customer (KYC) requirements.


The 7 Tax Types and Fees That Apply to MORs 

It’s important to remember that a Merchant of Record will incur the same tax obligations as any other merchant attempting to sell their products within a particular market or jurisdiction. 


Sales Tax/VAT: Merchants often have to handle tax registration, as well as collect and remit sales tax or VAT on the sale of goods or services. The rates and regulations can vary widely between different regions and countries, but the fees for filing and remitting sales taxes to multiple countries quickly add up.

Income Tax: Merchants are typically subject to income tax on their profits. The rates and rules for income tax depend on the business's jurisdiction.

Transaction Fees: Payment processors may charge transaction fees for each sale or transaction processed through their platform. These fees can vary based on the payment method used (credit card, debit card, etc.) and the payment processor.

Processing Fees: In addition to transaction fees, transaction processing fees may be associated with handling payments, especially for online transactions. These can include payment gateway fees, interchange taxes, and other costs related to processing payments.

Licensing and Permit Fees: Depending on the business’s nature and location, merchants may be required to obtain and renew licenses or permits to operate legally, which can carry different costs. 

Compliance Fees: Merchants may incur fees related to compliance with industry regulations and standards. For example, in the financial services industry, compliance costs are often associated with adhering to anti-money laundering (AML), know-your-customer (KYC) regulations, and PCI DSS. In most cases, these are not one-time fees but involve constant monitoring, yearly audits, and renewal of the certifications.

Chargeback Fees: Merchants may face chargeback fees associated with payment disputes. These are designed to cover the administrative costs associated with handling disputes, which are labor intensive and time consuming.


How Does the MOR Choice Impact Compliance?

Expanding your SaaS business globally not only increases competition but also introduces a range of compliance and regulatory challenges. Managing these challenges effectively is crucial to avoid costly consequences to not only your finances but your reputation as well.

The choice of your Merchant of Record (MOR) partner can play a decisive role in the success of your international growth. Here's how that choice can impact your journey.


With digital payments remaining on the fraudsters’ radars, security best practices need to be on top of your list. Without a PCI-DSS-compliant partner on your side, your business’ safety is at great risk. And with it, your international success.

Data Privacy

Your future in the global markets depends on your customers. Your MOR partner’s data handling practices and security measures must align with the industry's most stringent data privacy standards to avoid legal issues. 

Taxation And Reporting

Choosing a Merchant of Record that does not abide by the tax management and reporting compliance practices specific to the regions in which your business operates can slow down your growth. Your partner needs to have the resources to get your products correctly taxed all over the world, which means establishing local business entities, abiding by existing rules and regulations, and keeping up with changes. Check out our complete tax guide to find out more about this topic. 

International Payments

If you are selling overseas, working with the wrong MOR partner could affect the business's efficiency, customer satisfaction, compliance, profitability, and overall success. An inexperienced Merchant of Record may not be able to handle cross-border compliance issues properly, including currency conversion regulations. This could result in faulty multi-currency financial management, consequently causing significant revenue losses. 

Meet PayPro Global.

The Merchant of Record that helps you grow

PayPro Global takes away the headache of selling your products worldwide. From local payment methods to simplified subscription handling and tax management, we give you the eCommerce tools you need to scale your business smoothly into the global market.


Why is PayPro Global Different? 

PayPro Global stands out as a Merchant of Record designed to scale software, SaaS, and digital goods worldwide effortlessly.

With an industry experience that spans over 15 years, our platform is much more than a payments infrastructure. It’s a strong system overseeing the entire transaction process feature-packed to answer the needs of all businesses looking to expand in multiple countries. 

Complete Tax Management 

Forget all sales tax compliance frustrations. With PayPro Global on your side, you no longer have to worry about tax obligations, no matter where you sell in the world. From sales tax to VAT tax regulations, our team of experts is ready to handle all your operations flawlessly, wherever your clients might be. 

PCI-DSS Level One Certified Partner 

PayPro Global follows the industry's most stringent payment card security and compliance regulatory requirements and gives you access to a robust fraud detection system. This enables you to enhance your payment security, considerably reducing the number of cyber threats, thereby gaining your customers' trust. 

Global Reach 

To support customers from multiple countries and regions, we offer the right mix of local payment methods and currencies you need to grow, as well as all relevant supported languages, together with high-performing localization tools

PayPro Global’s Merchant of Record model isn’t just your typical payment provider. It is the go-to choice for thousands of SaaS and Software companies focused on customer acquisition and retention, as well as achieving international growth. 

Find out more about how our payments solution can strategically scale your business in global markets, or book a demo and let our specialists tell you how it can work wonders for your business and team.

Final Thoughts

In the dynamic SaaS industry, striving for international success independently can feel like an insurmountable challenge. Balancing operational demands,  intricate financial tasks, and tax and compliance issues can divert your focus from what truly matters: your product. 

That is why operating as your own Merchant of Record does not work as many businesses think it will, finding this out often after they have problems that never would have occurred with the proper payment partner. 

Given this perspective, it's not surprising that many businesses are opting for a dedicated and comprehensive partner in the form of a Merchant of Record service provider (MOR) to alleviate the burden of a very steep learning curve.

Yes, the Merchant of Record simplifies payment processing. But this payment infrastructure does much more than that. 

Merchant of Record service providers take care of the entire payment process, including managing and remitting sales taxes, handling customer data, securing financial transactions, and, ultimately, increasing sales.

But, making the wrong choice regarding a partner could be the case of "jumping from the frying pan into the fire," causing more harm than good.


Meir Amzallag

Co-founder and CEO of PayPro Global

Ioana Grigorescu

Content Marketing Manager at PayPro Global

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