This article will explain how tax is handled for your app.
Summary - TLDR
There is no tax in USA. Tax is charged specific to the user's region
Tax is charged differently for iOS and Android
iOS charges VAT from the price we see on paywall
Android charges VAT on top of the price that you see on the paywall
What do Breakthrough partners need to do
You don't have to do anything. This is to give you transparency on how the tax is handled.
Consideration:
You may want to consider increasing the iOS price since the tax is worked into the price we set.
Explanation
Breakthrough fully manages this for you so you don’t have to do anything. It is important to know how the price breaks down for your users.
For iOS, Apple charges a 15% fee on the app subscription price, and VAT is added to the subscription price at the time of the transaction. This means that the VAT is included in the final price that the user pays, but the we receive the revenue after Apple's fee & VAT is deducted. Meaning tax is included in the price you set.
For Android, Google also charges a 15% fee, but the tax is added to the app price at the time of the transaction for users in real time. Tax is not included in the price you set.
FYI Tax is applied based on the region. For example in USA there is no tax on digital products. The tax region is determined by the location of the user’s App Store account.
Example:
Let's consider an app subscription set at $10/month.
iOS:
Subscription Price: $10.00
VAT (10%): $1.00
Total Cost to User: $10.00
Apple Fee (15% of $10.00): $1.35
Revenue to us: $7.65
Android:
Subscription Price: $10.00
Google Fee (15%): $1.50
Total cost to user: $11.50
Revenue to us: $8.50
Tax note: Added to the subscription price at the time of the transaction (varies based on user's location and applicable tax rates)
For Android, if a user in a region with a 10% tax rate subscribes, the total cost to the user would be $11.00 ($10.00 for the subscription plus $1.00 tax). We would still receive $8.50 after Google's fee is deducted.
It's important for us to be aware of these differences and plan their pricing strategies accordingly to ensure they are compliant with tax regulations and to understand their net revenue from app subscriptions.