I am glad this includes the pre-tax price (even if it’s grayed out) so that patrons can see how much is being tacked on by their respective governments and that’s why it’s more expensive (that 21% tax, oof)
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We’re actually still testing a few different ways of displaying tax inclusive pricing to find the most familiar/useful option for audiences in these territories! I’ll let you know when the testing period is over and we have a final display. 
At least in Germany, it is required by law to include VAT in the price that is displayed. I guess the same goes for many European countries.
There is probably no ideal solution that fits everyone. Still, just as an example, it would be great to give creators the option to “round all tier prices in all countries”, or to set the price for each country individually if they have the patience.
Tier 1 in the screenshot above might then cost $5 (+ sales tax) in the US, €6 (including VAT) in the EU, £6 (including VAT) in the UK etc.
Creators with an international audience would still earn roughly the same, and new patrons would no longer need to see prices like “$42.35” on the page.
Maybe that’s a stupid suggestion and doesn’t work, but in general, giving creators more options would be great.
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That’s just what they put out as a statement. It does NOT change the fact that gross prices to consumers are a legal requirement for EU customers. So my earlier post remains 100% correct.
(Including the part about “reading carefully”, since that legal requirement was mentioned already in the discussion. I just edited out the accusation about it, since I care about the facts (not “picking fights”), so the accusation wasn’t particularly useful.)
Sure, I get that. What they’ve done now is a quick fix to comply to the local laws. It’s important to point that out (and that’s all I did), since some creators apparently don’t know these legal requirements and assume Patreon or the creators potentially have a choice there.
Once that is out of the way, it’s of course perfectly legitimate to discuss how to potentially optimize the pricing calculation and/or display. Personally, I would say that automatic rounding up or down would make sense, but I’m sure that would be very controversial among creators as well.
These laws are not so new that a ‘quick fix’ was necessary. What they’ve done is a pattern of behavior I’ve seen of over a year.
The laws aren’t new, but Patron’s international expansion is. As a purely US-based company with a large customer base in the US, a company can ignore EU regulations to some extent. Now that they are opening offices in Europe and actively making offers to EU consumers with Euro pricing, complying to EU laws is indeed something they need to do right away.
And is something they should have taken into account in advance. I’ve done this kind of thing in a past life. None of this should have come as a surprise to Patreon.
Is there any reason why this can’t be done? Because a number of digital marketplaces do offer this.
I sell digital goods and all the platforms I use that are European, or have a large European base, offer us the option to pay the VAT ourselves so that our customers pay the same regardless of where they’re from. The ones that don’t are in the US and/or have primarily US base, and I suspect this difference is because VAT is being viewed akin to sales tax, and there’s little understanding of how VAT and taxes are considered here.
Honestly, this is my number one want from Patreon (the 2nd being the ability to gift memberships). All the other features are nice extras but until I can offer VAT inclusive pricing and not penalise my EU customers I’m unlikely to build my Patreon audience as much as I could.
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I personally like this a lot! Non-US fans already know whatever digital product they buy from the USA is gonna cost more than the sticker price.
Everything they buy from the US does.
This just makes it easier for them. Thanks!
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I’m still a bit confused why does Patron collect the VAT. Shouldn’t it be transferred to me and then I pass it onto my government IF I earn over the VAT threshold? I might be wrong, but it seems off that VAT bypasses me, saying it’s for my convenience… I, for example, earn below that threshold, and thus am entitled to keep that tax to myself (I actually wouldn’t, I’d lower my prices – as had quite a back-clash last month (and drop in new subs) as several people messaged me saying I’m saying wrong prices on my Insta – little I knew Patreon decided to add massive bold $34 instead of $29 (why not 29 in bold and +4 VAT?!).
Please please adjust the design to clearly state that yes, there’s tax to pay, but don’t change the tier pricing, this gets very confusing with international audience like mine – where VAT fluctuates, and I can’t announce all-the-same-umbrella price for everyone no more. Really damages the marketing side of things for us.
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I second this! I, for example, DO NOT have to pay VAT in my country as I don’t earn enough. So what or whom am i paying with the “VAT” that patreon is collecting?
Hey everyone,
Over the last few weeks we’ve received so much meaningful feedback from you all on the fractional tier prices displayed as a result of tax inclusive pricing.
You told us that the way tiers were displayed gave you little control over pricing, branding and over your membership as a whole. This was also a sticking point for some creators who had not yet launched their page.
I just wanted to let you know – we heard you. As of today, we’re rolling back this version of tax inclusive pricing. Tiers will revert back to their original rounded price while we work on a solution that both gives creators more control over tier prices, as well as provides tax inclusive pricing where it’s expected.
No action is required from you and pledges from patrons will not be affected. Read through our FAQ here and let me know if you have any questions.
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That’s really great news! Thanks, Reyna!
(P.S. You might want to make an announcement about this in a top level post, too.)
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Please also add the option to not include VAT as well. As a number of people have said, I earn far below the income threshold and don’t need to pay VAT. If this isn’t fixed then I’m just going to look elsewhere.
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If Patreon views our patrons as their customers (which they do), it would come as no surprise that they think VAT is due based on their cumulative sales, not on the sales of the individual creator.
That said, some taxing authorities may view Patreon as the seller, and in that case, they’d be required to collect VAT/Sales Tax no matter what our individual circumstances might be.
Hi everyone, I’m about to launch a Patreon to support my business but this tax conversation and the apparent chaos around it has made me very nervous…
A few things.
I’m based in Italy. Here, and presumably in every country in the EU, the laws are very different to what is seemingly being understood and expressed by Patreon.
I must charge VAT on everything as part of my legal obligation (because of my particular type of business setup - there are multiple and some pay no VAT at all, others pay just on invoices. I pay on income received). Unless the purchaser is a registered company who can provide me their tax ID they will pay VAT regardless of what country they’re from. As this is Patreon, I will expect all my customers to pay this and if they don’t like it, they simply can’t support me. The bureaucracy to get around it simply isn’t worth it and doesn’t appear to be built into the Patreon system anyway. Patreon seems to be suggesting that users may be exempt from paying VAT based on their location. In Italian law, this is incorrect. And I will end up paying that tax regardless.
The second thing I’m worried about is that I seem to be unable to display my prices including VAT. I believe this is due to a recent climbdown from Patreon as they are trying to fix things, but in the meantime my tiers are showing as +VAT which mirrors the issues given above. It makes my tiers too expensive, and the math to change them is a pain and could mess me up later if the system changes.
Thirdly and perhaps most worrying of all is that I keep hearing that Patreon will ‘take care of the VAT’. Does this mean they will take and process it, deducting it from my earnings? This is simply impossible under Italian law. I will have to give 22% of my earnings to the state. If you deduct this before sending the money to me, I will have to pay a further 22% in VAT as it is a tax levied on money received. I will lose 44% of my pledges instantly.
I read about the UK guy above - I’m a Brit and he’s right. It’s not just unusual for freelancers like him to be VAT registered if you earn below the threshold which is quite high - it’s illegal for him to charge VAT.
So, is Patreon the one charging the VAT or us? If it’s going to be Patreon, I’m afraid I can’t launch here. Because I will be entirely uncompetitive as I will be effectively paying the VAT twice and losing 44%. This is surely an untenable situation?
I really hope some common sense is applied here and that creators are given all the control. It should’t be Patreons problem if creators are tax-dodging, let the country’s law enforcement deal with it. It’s wide open for the whole internet to see anyway!
As a little aside, my business uses Kickstarter to fund its projects currently. I receive a lump sum from Kickstarter, and the onus is clearly stated as being on US to play by the tax rules. And I do, but it wouldn’t be their responsibility if I didn’t.
EDIT - I’ve just read the small print and it appears that VAT will be ‘handled’ only for digital services and tangible goods (me) will be left to us. I sure hope so. This could be a huge mess if I launch and my funds are missing their VAT. Please can this be clarified?
Hi Jocu, Thanks for writing, and we apologize for the inflexibility afforded us under EU law. As per our talks with taxing commissions, Patreon is responsible for collecting and remitting the VAT due on the pledge income earned by Creators in accordance with Article 9a of Council Implementing Regulation 282/2011/EU. In other words, we act as a portal through which electronically supplied services are provided. The service (of your tier) is being provided to Patreon (a US company) and subsequently rendered from Patreon to the Patron. Where the Patron is located informs what tax rate (VAT/GST/US Sales tax, etc) we are obligated to charge and collect from the Patron. (We then remit those funds to the locale of the Patron.) Hope this helps!
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Thanks Michael! I understand this position is due to Patreon’s understanding of their own role in the process and in the marketplace. This, I guess is fine, but for the vast number of creators selling physical projects (not just digital services) then this will unfortunately be a non-starter.
My tiers will all be physical, (apart from one ‘behind the scenes’ tier) are you confirming that even then Patreon will take 22% in VAT first? Because I can confirm that Italy and from what I read here, at least German customers will also have to pay a further 22% on the money received. This is obviously untenable for both creators and patrons, and could cause a wave of fiscal rule-breaking for creators from the EU. In Italy they don’t mess about regarding this - you will pay that 22% and then some for every day that it is overdue.
Such a shame, as it seems Patreon would be far more profitable and successful going forward if it were to position itself like, say, Kickstarter or any of the other Patreon-alternatives that take their income in a flat percentage and pay the appropriate fees on that, giving the rest to the creators.
Well, no. I am in Germany. Money from US companies is always tax-free for me, since it is a non-EU (business) transaction. I am doing this for around 20 years and my local tax department never saw any problems with this as long as I can prove that the money came from a company outside the EU. For ongoing payouts, I will usually have to sign a document like W-8BEN so the US company doesn’t have to without US tax for the IRS.
And it doesn’t matter in that scenario where the customers of my products are. It’s the US company which takes care of the consumer taxation, as Michael just explained. It’s their obligation, not mine. The business transaction is happening between the patrons and Patreon, not between the patrons and me. The latter would be the case when a patron would directly send me money to my PayPal account for example. In this case, invoicing and taxation would be my responsibility.
I do understand you might be in a special position with your “taxation based on income”. But as far as I am aware, that doesn’t apply to a majority of EU creators. I know too little about this special scenario to give any recommendations. Only local tax experts would know.