Paddle Payment system issues


(Nick Wilcox-Brown) #1

Hello everyone,

What started as a small issue when purchasing a RW8 upgrade has significant implications for anyone who has implemented a Paddle payment system for a UK business

This relates to any UK business where VAT is involved. Paddle is charging VAT on UK Pound (GBP) transactions (as you might expect), but providing an Irish (Eire) VAT number which is Incorrect. UK businesses cannot reclaim VAT from an Irish VAT number. I am not a VAT or Tax expert, but I have several experiences with this problem in the past.

For purchases that are virtual (licences / software), the UK registered business enters a GB VAT number and the VAT is removed from the transaction under the EU regulations.

For example. buying the RW 8 upgrade, the process should be that I enter my GB (or other EU VAT number) and Paddle then charges the net figure. In fact they (incorrectly) charge the price including vat because their location for charging (and their vat number) is the Republic of Ireland.

It may be worth being aware of this for your customers who are using Paddle.


(Jannis from inStacks Software) #2

Looks all good for me for a German VAT number (19% VAT)

43,61 € * 1,19 = 51,89 €

Maybe this is just a UK <-> EU / Ireland thing?


(Nick Wilcox-Brown) #3

Hi Jannis,

Yes, it works fine for non-UK systems - the problem is the UK GBP transactions and the Irish Republic location for VAT purposes, so the problem affects UK businesses. Paddle are not responding to support requests (which is a pity as they used to be London-based and excellent).


(Jannis from inStacks Software) #4

Why isn’t that possible?


(Nick Wilcox-Brown) #5

The costs and admin involved only make it worthwhile if the VAT reclaim is multi-thousand GBP - an accountant quoted me a break even reclaim figure of £20,000(!)


(Jannis from inStacks Software) #6

But, if you enter a (your?) GB / UK VAT number, the tax is correctly deducted?

So your example is only for GB / UK businesses without VAT number?

Sorry for all the questions, just want to understand.


(Brian LaPan) #7

Any chance you’ve checked with help@paddle.com on this? If yes, nevermind. If no, then I’m sure they’d have more accurate input than most (if not all) folks here.


(Jannis from inStacks Software) #8

IMHO, Paddle does know what they are doing.

I found the appropriate legal chapter here:

https://paddle.com/legal/

Acceptance of Terms

These Terms of Use relate to the services provided to you by either Paddle.com Market Limited, a company incorporated in England and Wales (company number 08172165) or Paddle Payments Limited, a company incorporated in Ireland (company number 572448) in each case (“Paddle”). Where you are trading from the United Kingdom all services will be provided by, and the party you are contracting with will be, Paddle Payments Limited; and in all other cases it will be Paddle.com Market Limited, with Paddle being a reference to the appropriate entity. By signing up for our services, you agree that you have read, understand, and accept the terms and conditions described below (the “Terms of Use”) and you agree to be bound by these Terms of Use and all terms, policies and guidelines incorporated in the Terms of Use by reference (including Privacy Policy which can be found at https://paddle.com/privacy (or such other URL that Paddle may provide from time to time)). If you do not agree to these Terms of Use, you should not use the Services (as defined below) in any way. The Services are offered to you conditional on your acceptance of these Terms of Use.


(Nick Wilcox-Brown) #9

Brian, they were excellent the last time I used them, but it seems that they now have a UK and IE base - with a payment made in the UK, in GBP, the receipt should provide a UK VAT number and address.

Apple used to operate in this way until recently with iTunes ie Irish VAT number - I had a very, very long conversation with the UK VAT officers about it (hence my knowledge) as it was impossible to reclaim VAT on iTunes purchases (which was fine for small transactions, but when they started to sell major applications, it became a major issue - there was £60 of VAT on FCPX!). Interestingly Adobe have always operated their payment system properly.


(Nick Wilcox-Brown) #10

Jannis, there was no indication of their Irish location until the VAT receipt came through.

Currently I have not implemented my RW8 upgrade serial until this is resolved.


(Nick Wilcox-Brown) #11

Not a problem at all :slight_smile:

Because it is a UK transaction in GBP, there should be no need to add a UK VAT number, their ‘tax base’ should be UK (their website says London-based) and their VAT receipt will have a GB **** **** ** number. Because they are charging in GBP, there is no option for adding the number, but their legal tax location is the Irish Republic, not UK.

Because their ‘tax base’ is the Irish republic, the transaction should be handled exactly the same way as when you buy from Germany ie there should be a space for ‘ADD VAT Number’ and, so long as I have a valid VAT number, no VAT will be charged on the transaction. There is a trivial amount of VAT on RW8, but my point is that this could be significant for anyone using a Paddle payment system in the UK.


(Dylan Banks) #12

Because it is a UK transaction in GBP, there should be no need to add a UK VAT number

How else are you going to be able to claim your VAT back? Paddle includes the VAT in the base price (Whether it’s correct or not, you would need to speak to Paddle. Not sure posting here is going to fix it if it’s wrong). There’s an option to enter your VAT number if you’re in the UK anyway.

Because their ‘tax base’ is the Irish republic, the transaction should be handled exactly the same way as when you buy from Germany ie there should be a space for ‘ADD VAT Number’ and, so long as I have a valid VAT number, no VAT will be charged on the transaction.

Again, there’s an option to enter your VAT number. :sweat_smile:


(Nick Wilcox-Brown) #13

Perhaps take wee read through the whole topic, and check the screen shots :wink:


(Dylan Banks) #14

:man_shrugging: yeah I was just a bit confused when you said there’s no option for adding the vat number in the UK, but there is. As usual, I’m probably missing the point.


(Nick Wilcox-Brown) #15

Interesting - just checked - now an option to add VAT number for UK :slight_smile:

Result!


(Paul Tebbs) #16

To clarify this, Paddle Payments Ltd is an Irish entity which is reselling the software and therefore if a UK buyer enters a valid VAT number then the transaction will have no VAT on it (cross-border transaction subject to reverse charge). Feel free to email sellers@paddle.com if you need any more info.
Best
Paul @Paddle


(Paul Tebbs) #17

Just to add, we are fully compliant with European tax law and take it very seriously - see https://paddle.com/taxes-fraud-compliance/ for an explanation of how we handle tax as Merchant of Record.
Best
Paul @Paddle


(Roberto Tremonti) #18

Paddle, unlike RapidCart Pro :wink:, doesn’t automatically handle EU VAT, so you need to contact Paddle support asking for VAT refund and a new invoice.

See my reply below.


(Jannis from inStacks Software) #19

?

I don’t know where this statement comes from. Of course they handle all the EU-VAT stuff.


(Roberto Tremonti) #20

No, they don’t if the customer is a EU company.

As per B2B EU regulations, EU companies must fulfill VAT payment by themselves (that’s called reverse-charge), while Paddle collects VAT regardless customer is a private citizen or a company.

When you are a EU company and purchase goods thru Paddle, first you need to pay VAT-included amount, then contact Paddle support for VAT refund and a valid EU invoice.

See my reply below.