Understanding VAT Collection On Teachable

This article explains how school owners handle the collecting and remitting of EU VAT when using Teachable’s payment gateway or custom payment gateways.

Understanding VAT and Your Tax Liability as a School Owner

The European Union Valued Added Tax (VAT) is a tax that is assessed only on purchases made by customers located in the EU. EU VAT applies to any merchant selling a product or service (including digital products like a course) to a customer based in Europe. It doesn’t matter where the merchant is based; only the location of the customer determines whether or not VAT should be applied. Therefore, EU VAT may be collected from your customers even if you’ve never set foot outside the USA, if you have European students purchasing paid courses through your school.

As a school owner using Teachable, your tax liability depends on which payment gateway option you choose for your school. Since Teachable is the legal merchant of record, if school owners use our payment gateway, then we take care of filing and remitting VAT. If a school is using a custom payment gateway, then the school owner is responsible for remitting VAT.

According to EU regulations, when students pay through Teachable’s payment gateway, Teachable is the legal merchant of record. By law, Teachable must collect the appropriate VAT from EU users when they check out and remit the taxes to the EU on school owners’ behalf.

NOTE: For schools using Teachable's payment gateway, Teachable's address will appear on receipts whenever a valid VAT ID is applied during checkout. This is due to the fact that, in compliance with VAT laws, Teachable is considered the merchant of record for transactions in which our payment gateway is used.

If you use custom payment gateways, VAT will be automatically collected by default and paid out to you directly. Therefore, you are responsible for remitting VAT payouts to respective EU governments. We have transaction reporting tools that allow school owners to determine their tax liability in order to remit the proper amount of VAT collected from students.

Determining VAT Rates

As mentioned above, your tax liability depends on which payment gateway option you choose for your school. However, Teachable uses the same process for determining the proper VAT rate to charge a student at checkout regardless of which payment gateway (or payment method is selected).

VAT rates are determined based on a combination of factors; Teachable automatically collects information about a user's location based on factors such as their IP address and billing country. Once we have determined where a user is located in the EU, we use their country’s current VAT rate to add the appropriate tax (see below for a list of tax rates) on top of the purchase price. If you’ve enabled VAT inclusive pricing, then the VAT amount is included in the purchase price across your entire school.

Here is a full list of VAT taxable countries and current tax rates:

VAT Taxable Countries and Associated Tax Rate

Country

Current Tax Rate

Austria 20%
Belgium 21%
Bulgaria 20%
Croatia 25%
Cyprus 19%
Czech Republic 21%
Denmark 25%
Estonia 20%
Finland 24%
France 20%
Germany 19%
Greece 24%
Hungary 27%
Ireland 23%
Isle of Man 20%
Italy 22%
Latvia 21%
Lithuania 21%
Luxembourg 15%
Malta 18%
Monaco 20%
Netherlands 21%
Poland 23%
Portugal 23%
Romania 24%
Slovakia 20%
Slovenia 22%
Spain 21%
Sweden 25%
United Kingdom 20%

If a user has a VAT ID, then they’ll also have the option to add a VAT ID during checkout. 

Displaying VAT Inclusive Pricing on Your Sales Page

As a school owner, you can choose to display VAT inclusive prices on your course’s sales page and your school’s course directory.

You can enable VAT inclusive pricing in the Settings > Taxes section of your school’s admin area. When enabled, customers located in countries that levy VAT will see VAT inclusive prices on the sales page and course directory. While the precise VAT amount won’t be noted on the course sales page or course directory, students can see how much VAT they are being charged on the checkout page in the Order Summary section.

NOTE: The option to display VAT inclusive pricing in your school is not available to school owners who have disabled VAT collection.

To enable VAT inclusive pricing, follow these steps:

  1. Log in to your Teachable admin area.
  2. Select Settings from the admin sidebar.
  3. Click Taxes in the submenu.
  4. Under Show VAT Inclusive Prices, toggle it to be on.
  5. Click Save.VAT_inclusive_price.gif

Disabling VAT Collection (Custom Gateway Only)

As mentioned above, if you are using Teachable’s payment gateway, VAT compliance will be automatically enabled and you won’t have to worry about it. For schools with one custom payment gateway set up (Stripe or PayPal), VAT will automatically be charged at checkout.

However, for schools with both custom payment gateway credentials set up (Stripe and PayPal), VAT collection is optional but will be on by default. VAT collection can be disabled in the admin area under Settings > Taxes > Tax Settings. When VAT is collected over a custom payment gateway, Teachable does not collect the taxes, rather, they are paid out straight to your Stripe Connect or PayPal account along with the rest of the purchase, and you will be responsible for filing and paying the taxes yourself.

To disable VAT compliance when using both custom gateways, follow these steps:

  1. Log in to your Teachable admin area.
  2. Select Settings from the admin sidebar.
  3. Click Taxes in the submenu.
    admin_setting_taxes.png
  4. Under EU Digital Goods VAT Tax on Custom Gateways, toggle it to be off.
  5. Click Save. A notification will appear letting you know that Exclusive EU Digital Goods VAT Tax has been enabled.

NOTE: If you switch between enabling/disabling VAT collection, while subscriptions will be processed by whichever gateway is active, subsequent subscription charges will be based on the initial subscription charge. So if VAT was disabled at the time, VAT will not be charged if you enable VAT collection after the initial subscription charge.

Viewing VAT Fees in Your Transaction History

If you’ve set up custom payment gateways, and are therefore responsible for remitting VAT payouts, then you can use Teachable’s transaction reporting tools to determine the VAT rates charged to your students.

You can calculate this by exporting your transaction data in the Sales section of your school admin. Once you have downloaded a CSV of your transaction data, you can reference the VAT Fees and Charge Country columns to determine your tax liability.

NOTE: These are general recommendations. Teachable cannot give tax or financial advice and is not liable for any losses or tax liabilities due to actions that are taken (or not taken) based on these recommendations. Always consult a local tax professional when planning your taxes.

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