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What happens to subscription payments if a country changes its VAT rate?

The Easy Digital Downloads EU VAT plugin automatically charges the correct VAT rate based on the customer's location at the checkout. This happens in the following situations, all of which use the standard EDD checkout:

  • New sales.
  • License key upgrades.
  • Manual renewals (e.g. if you're not using Recurring Payments, or if the customer has previously cancelled their subscription and needs to renew manually).

If you're using the Easy Digital Downloads Recurring Payments extension then an automatic subscription might be set up when the customer completes the checkout. Since future subscription renewals take place outside of the checkout, our plugin has no way of knowing if the tax rate has changed in a particular customer's country - instead, it will charge the correct VAT rate from the time that they first signed up to the subscription.

There are several ways to fix this for the affected customers:

  • Follow the instructions for Adjusting Pricing of the recurring payments to ensure that the correct tax is charged. This is only available for certain payment gateways, such as PayPal and Stripe.
  • As a last resort, you can ask customers to create a new subscription so that they pay the new rate. This would involve cancelling their original subscription and going through the checkout to create a new one.

Tip: To avoid lost renewals, we recommend only asking customers to recreate their subscriptions if they paid tax at the old rate. Don't ask customers who had their VAT reverse charged to create new subscriptions, as their existing ones are still correct.

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