Payhip takes care of VAT

TLDR; Payhip will take care of the #VATMESS for our lovely authors! :-) Tweet or Share this please.

I’m sure we don’t need to explain the problems and impact VAT MOSS will have on authors around the world. A lot of very smart people have already written about this but the main change is that VAT will be due in the country that the purchaser is located rather than seller. This is to stop companies like Amazon, Google, Apple etc from enjoying a low VAT rate as they base their digital content services in Luxembourg, tax loophole closed.

After considering the problems faced by authors and a lot of other small businesses we couldn’t just stand there and expect authors to handle this mess themselves. So we decided to change our business model altogether to handle VAT on behalf of our authors.

As of the 1st of January 2015 Payhip will become a true distributor of ebooks and other digital items. Our terms and conditions will change to state that Payhip will buy a license from you as an author to give us permission to resell your books for you at your chosen price. No exclusivity and you can cancel this license at any time by just removing your ebook from Payhip.

This allows us to take on the legal burden of handling VAT and reporting it to HMRC (UK). You don’t have to do anything apart from choosing whether you want to include or exclude VAT in your ebook price when we sell to European readers for you. This setting will be available from the 1st of January.

We will also be providing full reports on all your transactions and those transactions that included VAT. These reports will also be useful for those authors that need to report their income to their respective government departments (not VAT). The first report will be available at the end of January and every month thereafter.

We would like to thank our awesome lawyer, fantastic accountant and knowledgeable VAT expert for helping us through this process.

Well, that’s that then! Forget about the VAT MESS and enjoy your holidays! :-)


  • TRiPPY

    Thanks for being the good guys!

  • Susan Briscoe

    I’m definitely interested in placing my planned e books with you after reading this.

    • That is great to hear! :-)

  • nathgirard

    You guys ROCK.

  • Louise

    This is amazing – thank you so much!!

  • Sandra Jansen

    Is your service only available for UK authors? I would be interested to
    use your platform, but I am located in the Republic of Ireland…

    • Hi Sandra, It is available to all authors and content creators from any country.

  • MAhjytta Crakboumhu

    this is wonderful and I’m going to join with my comics, but can you tell us how much you’ll charge us for this service?

  • Hi Rosie,

    We’re happy to answers your questions. Hopefully, I’ve answered them all below. :-)

    We will be collecting two pieces of information for each customer, IP and billing address. Since we will be a true ebook distributor and are now VAT MOSS registered we will be taking the legal liability of making sure everything is correct in the checkout process.

    We auto detect the country the buyer is in and then give them the option to confirm this. We then calculate the correct VAT. For customers, that are deliberately spoofing their location, we do not yet have a procedure for this.

    All our authors and content creators have access to their customer’s information. This includes their email address.

    We will submit MOSS returns as we are the point of sale. We have agreed with authors and content creators via a license to resell their work. This means we handle the VAT and authors and content creators simply wait for their payout. We are in the final stages of the draft for our Terms and conditions.

    Our goal with this change is to simply reduce the large amount of admin work and hassle that stands in-front of authors and content creators because of the (not so new) EU VAT regulation.

    • Thank you. So to clarify, it’s you the EU country would be auditing, not the seller, and you also handle the data protection (included in your terms) so the seller doesn’t sell the buyer’s actual required location evidence and therefore doesn’t need to do the admin of keeping it for 10 years etc.

      Again, asking in the spirit of needing solutions, what happens in the case of the 2 pieces of location data conflicting? Do you ask for a third, and what happens in cases where you can’t get 2 pieces of agreeing location data?

      (And since if you don’t ask, you don’t get, any solution yet to the problem of payment buttons in an email, so the buyer doesn’t even go near a website?)

      Are both IP and address self-verified? I appreciate your honesty about the problem of VPNs and fraud (and people buying on their company’s internet connection using a VPN etc…..)

      • Hi Rosie,

        Yes, we don’t show user address to sellers and we will store this data for 10 years.

        We haven’t got any conflicting pieces of data but when that happens we plan on emailing the customer to confirm. If no confirmation, we will probably have to take a hit on the VAT.

        In terms of payment buttons in emails, our solution will work for this. If you are selling via email, you can simply link to a Payhip page and we will perform the transaction as usual. I hope this is what you meant!

        I’m not sure what you mean by self-verified but we collect the IP address using our servers and we store the address entered. We do some basic checks (correct format etc) on the address before storing.

  • Brilliant – I have just joined and added all my e-magazines and knitting patterns :-)

    • Awesome! I hope you find Payhip useful! :-)

  • Petr

    Hello, it is possible to use your service for software or for e-books only?

    • Hi Petr, Although we’ve decided to concentrate on ebooks, you can use Payhip to sell any digital item, we support all file types.

  • Susan Briscoe

    I’m sure I read somewhere that you’re going to give us the option to list prices ex VAT, so that the appropriate level of VAT can be added when we make a sale, so someone in the USA (no VAT) and someone in Hungary (27% vat) don’t have to pay the same price, which seems fairest to me. But I read the following info recently, from HMRC –

    “Valued Added Tax (VAT)
    (i) Price indications to consumers
    2.2.9 All price indications you give to consumers, by whatever means, should include VAT. This total price must be displayed prominently so that consumers can see it.”

    Source: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/31900/10-1312-pricing-practices-guidance-for-traders.pdf

    In other words, leaving the final VAT-inclusive price until the final page of the checkout process (after you have their address) is not acceptable.

    Can you come up with a workaround for that? I would really like to only have to charge my customers the actual amount of VAT that applies to them, otherwise it feels like I’m unfairly profiteering off those who are countries where the VAT doesn’t apply.

    I hope you can help! Maybe when customers come to the site, there could be a menu for them to select their country, so the price displays appropriately?

    • Hi Susan,

      The problem is that we do not know for certain the buyers location so we can not display price including VAT until they have selected their location. Once they set their location and billing address, we show them the final price with VAT, if VAT needs to be applied.

      The paragraph you highlighted states that we should show price with VAT but there will always be a point when a price will be shown without VAT as the buyers location is not determined.

      You have an interesting suggestion, but what about customers that do not need to pay VAT, why do they have select their country? I feel this may reduce user experience and make it easier for others to pick a country that is not theirs and avoid VAT all together!

      I don’t think there is a perfect solution but we always tend to worry about user experience and trying keeping things simple.

      • Susan Briscoe

        Thanks for that great reply. Yes, if a customer is not in the EU, there’s no need for them to have to select their country at all.

        I see what you mean too about a customer deliberately choosing another country so as to avoid VAT, but at checkout, wouldn’t the correct country show anyway?

        When I start listing my e booklets with you, I will show all the different EU (and the non EU) prices applicable via a table on my website, and explain that the price will be shown ex VAT when customers come to the Payhip site. I think that is the best I can do. I will then list my prices on Payhip ex VAT, so the customer will pay the correct VAT amount on checkout. It seems the fairest way to do it. That way, customers from the UK and USA (for example) won’t get charged a higher price.

        • You are right the country would show anyway, but we don’t show price until the final checkout page. It is not ideal, but it does try to avoid customers from fiddling with VAT. Since country changes and price being showed is not immediately on one page.

          The price matrix you will develop seems quite complicated! :-) However, it does seem fair.

          One thing that others are doing is slightly raising their price for everybody and including VAT for EU buyers. This is to account for any loses from VAT and trying to find a middle ground so that everybody pays a similar price.

  • Jo

    Just been reading your website with interest. It all sounds fab, but I have one question concerning the payment process. In your terms it says that the end use pays us directly into our paypal account and somehow you get 5% at point of sale. a) how does that happen? and b) what about the VAT how do you retain that so you can make the payment to VATMOSS?

    • Hi Jo,

      I have answered your questions below:

      a) We use Paypal’s API to do this. They give us the option to supply multiple Paypal accounts to perform one transaction. This is the same for the transactions we make with Stripe.

      b) During this transaction, we calculate the VAT and on top of our 5% we hold onto the VAT so that we can report it on VAT MOSS and make the relevant payment to HMRC.

      I hope the above helps and make sense.

      • Jo

        Sorry I’m being really thick, but what is an API? And does that mean you have access to my Paypal account? Can’t imagine it does but thought I ought to check. You’ll have to talk to me as i if I am a total technophobe!!

        • No problem! :-)

          An API is application program interface. It’s just a way that Paypal allows to perform a transaction and send money to different parties. We won’t see any of your account details at all except whether its verified or not – Paypal will protect your privacy. We can only use verified accounts. I hope this makes things clearer.

          • Jo

            Thanks so much for clarification!

  • Bob

    The way I read this new EEC VAT law, is that although Payhip provide the
    required information regarding the country that the buyers reside in,
    the UK seller still has to register for VAT with HMRC UK and then
    VATMOSS, submitting four VAT returns per year. I really can’t be
    bothered with registering for VAT – it is bad enough doing an annual tax
    return. Consequently, I have removed all my e-books from Payhip.
    This is a great pity, because I was beginning to do quite well with
    sales in excess of £200 before this new law came in. At the
    present, I am lying low in the hope that some sort of VAT threshold will
    be introduced for low volume sellers of digital downloads such as
    myself.
    I have heard that Amazon do the whole lot, and actually pay
    the VAT to the EEC country involved. But the Amazon system is too
    cumbersome for me, so I have just had to stop!

    • Hi Bob,

      I think you misunderstood the post! When we say “Payhip takes care of VAT” – that is exactly what we mean!

      We are legally required to calculate and report VAT. This means you don’t have to do that at all if you sell through us.

      I hope the above helps.

      • Bob

        Hi,
        Still not clear at all! I know Payhip calculates and reports VAT. But do they actually pay it for the seller and deduct it from the seller’s payment? If Payhip just calculates and reports it, I take it that the seller still has to to register for VAT and then again at VATMOSS, submit four VAT returns per year and pay it themselves!
        Bob

        • Hi Bob,

          Ah OK. I guess it is not very clear.

          When we say “reporting it to HMRC”. We mean actually paying VAT. The VAT is added or included in your price depending on what you set in your settings. “You don’t have to do anything” when it comes to VAT as we “take on the legal burden”.

          I hope this is clearer?

          • Bob

            Yes, that is a lot clearer thanks. You pay it on the seller’s behalf. All the seller needs to do really, is to increase the price to include VAT for EEC sales. It would have been better to actually say “We pay it to HMRC instead of “We report it to HMRC!” But all is well that ends well, and I will be back shortly with my Payhip E-books. Thanks for you prompt response to my concerns.
            Bob

          • No problem at all. We’ll try to be clearer next time! We look forward to having you back. :-)

  • Paul

    Firstly, well done on solving this.

    My question is when a UK seller is already VAT registered but uses Payhip for its simplicity and for dealing with the EU sales.

    As the sale of the licence is B2B (UK seller to Payhip), the UK seller is required to charge, invoice and account for VAT.

    What is the substance of Payhip “buying the licence” from the original seller? i.e. how do we invoice Payhip as such?

    Just trying to understand how it might work in that case.

    • Hi Paul,

      Thank you for your kind words.

      The solution that we currently have works well for those that are not VAT registered since we wanted to solve the problem that effects the most number of people and those people that would find it most difficult to register for VAT MOSS.

      For those that are VAT registered already, the solution we are currently working on is to charge the end customer VAT as normal but for you to invoice us on our right to distribute your material (the licence). We will be making use of a monthly invoicing service (TBA) to handle this.

      We will soon be releasing this process and would love it for you to try out the beta release.

  • Lynne Christie

    I’m so pleased you are dealing with the VATMOSS for us, thank you! I can spend more time designing my baby knitting patterns and get them listed as instant download PDF files, rather than spend hours on the pc doing book keeping. Thank you again!

    • You’re most welcome! :-)