VAT (Value Added Tax, sometimes known as Sales Tax), is a tax on purchases. VAT must be collected on digital products sold to consumers within the EU, on certain inter-state US transactions, and in a growing number of other countries. It is charged on top of the sale price of a product and must be returned to the relevant tax authority i.e. the governing body at the buyer’s location.

This means that whether a VAT charge is applied to a purchase depends on the location of the buyer; if the buyer is from a country where VAT applies, a VAT charge will be applied to the transaction. The buyer is responsible for paying the VAT. Whether you - as the seller of the product - are VAT registered has no impact on this process.

The good news is that by using Paddle, you don’t need to worry about any of this. We will make sure the appropriate VAT amount (see rates per country here) is collected from the buyer and passed on to the authorities in the buyer’s home country on your behalf. How we do this is explained here.