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Charge VAT on Add Funds Credits

  • Adam Ošťádal shared this idea 11 years ago
  • Payments/Billing

129 Votes
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We are company based in European Union. Here we have to pay VAT from every received payment including credit which client deposits onto his client account as credit.

We cannot use current credit system in WHMCS because it is not fully legal in EU.

Is it possible to add some EU-friendly credit system?

1) Client adds funds/credit to his account and gets an invoice where the deposited amount is the amount WITH VAT included and only the amount WITHOUT VAT is added to his credit account.

2) When he uses credit to pay any invoice, there should be following scheme:
Merged Ideas
    Have Option to Not Create Invoice When Customer Add Funds
    Currently WHMCS creates an invoice when a customer add funds to their account.Can we have in the General Setting -> Invoices where we can select an option so that WHMCS doesn't generate an invoice when the customer adds funds to their account.Thanks
    tax on add fund invoice
    Hello,In europe, we need add tax on all invoice.So, " add fund invoice " generate invoice with tax.Thanks a lot.Luc


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This would need to be flexible. My understanding is that credits do NOT include tax in Australia. (However, searching on the ATO site is not helping me verify this today.) They are only considered a Taxable event when they are paying a Tax Invoice. This sounds like it would be a headache to make suitable for both instances. Good Luck!
Andi Becker wrote:
EU customers which are a company registered in the EU will have also an
EU Tax ID and those customers don't have to pay the VAT TAX

It is more complex than that. I know at least one country (Spain) where national companies with EU Tax ID do pay VAT. Only foreign companies with an EU Tax ID are exempt from VAT there.
This is normal in the EU. A special line on the invoice is required to use this. Adding this line is something WHMCS could make easier. However having a credit including VAT (as it is now is usable/legal I think).
Adding VAT tax to the funds and only deduct them if they get used is much too difficult higher mathematics for people which still calculate with withholding taxes which isn't existing in most European Countries. But this also means that WHMCS won't work either with countries where they have that withholding taxes as here the customer won't pay the full tax as the tax the customer pays gets split up in a part paid by the customer and another part by the seller. And that is probably the reason why WHMCS does not add the VAT Tax to the funds.

In other words WHMCS will for sure be also unusable in future for people which have to deal with EU customers - which INCLUDES by the way also WHMCS as they have to deal with EU customers themselves and are NOT allowed to NOT include the VAT TAX into the funds and are only allowed to deduct any VAT TAX actually from single customers who can't present a EU Company Tax number as all EU customers which are a company registered in the EU will have also an EU Tax ID and those customers don't have to pay the VAT TAX but for all EU customers who don't have that TAX ID the SELLER i.e. WHMCS would need to pay the 19 - 25% Taxes depending on the EU country the buyer resides (NOT where he does the purchase!!!).

I would suggest that WHMCS is changing the way how they calculate and doing their TAX math immediately to a proper and correct one.
i.e. WHMCS would need to pay the 19 - 25% Taxes depending on the EU country the buyer resides (NOT where he does the purchase!!!).

And even there is an exception rule which companies can use if there is only small revenues. If you do not make more than 10K-15K (don´t remember the correct value) a year, you can use your own countries VAT as with any other invoice too. I believe this is europe wide regulation. Should make the job easier for small companies but is simply more to consider when developing payment solutions.
[quote]1) Client adds funds/credit to his account and gets an invoice where the deposited amount is the amount WITH VAT included and only the amount WITHOUT VAT is added to his credit account.[/quote]

Thats completely wrong!

Clients have to add Credit with an Invoice WITHOUT TAX! They pay the tax when they pay their Products and not when just load up his account. If you do this you Pay double Taxes on your side. Speak to your tax consultant or look for an consultant who know what he is doing.
I agree with scysys for a very simple and logical reason. At the moment you top up your credit, it is not known what product or service will be bought and therefore you cannot determine which will be the VAT rate to charge. There are countries with different VAT rates. Hosting might be one percentage and teaching another (some web service companies offer courses to their clients). In Spain VAT on teaching is 0%.

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No, you are not right. Once you charge the money you have to pay VAT. In this case you are selling product called for example "Credit for IT services"

It is easy - when credit is added you have to provide Full VAT invoice

Then when credit is used on some service, just informational email needs to be send
- There was amount XXX subtracted from your credit. With no invoice action. Kinda opossite to current system.

Both ways are ok. Both ways have pro and cons
With "whatewer" way you have to treat the money as loan or something similar. Because you are taking care of money which doesnt belong to you, When you sell service called "credit", in moment you have received money, it's done from accounting view. Ask you accountant .o)

Anyway - it will be great to have credit system usable in EU, i'm waiting for it 7 years of using WHMCS..
As much i usualy like to bash whmcs for their non compliance in many aspects here aer you wrong guys.

it is liek this,
prepaid with a certain products on the prepay invoice = its a sale, you have revenue, you need to charge VAT and whmcs would nto be compliant

prepaid WITHOUT a product specified = NO VAT, no reveneue, no nothing.
this is kinda a loan/deposit/retainer VAT is only applicatble after the final invoice

until then - the money still belongs to the customer, he can at any time as to transfer it back and you have to comply (except some contracts still running and have to be charged or require that retainer but thats another legal question)

but as long you do not chargefront and speify a products no sale is taken place, therefore no revenue is taken and not VAT does apply.
I agree. I am an accountant and the logic of credit system is as described above, which is totally fine.
Same request for us in France !

The actual system is not compliant for our country. It's critical.

To be compliant, the needs to display on the invoice total lines is :

Total amount without VAT (example : 640€)
- Crédit without VAT (example: 40€)
= Total without VAT (example : 600€)
+ TVA (added to Total without VAT) (example at 20% : 120€)
TOTAL WITH TAX TO PAY (example: 720€)

Please guys at WHMCS, it's a big problem for fiscal administration and us.
CREDIT system of WHMCS is not compliant to legal requirements in EU and many other countries. It is a MUST that this gets fixed immediately as we get in really serious legal trouble with authorities if we continue using WHMCS!!! with the illegal way it is handling Credits - and some other accounting related things!
I had meeting with my accountant in december and he told me that our government tax agency had made inquiries in our "Credit" system.

We can get in deep trouble, current WHMCS credit system are to be recorded as LOANS to your company and not to be added to revenue.

If it is prepaid you customer have to pay tax over it and then it can added to revenue.
At this moment SALES TAX LIABILITY doesn't have difference between PREPAID payment and APPLIED credit payment.

So if you have 10 customer paying 100 euro credit and using it complete that year.
You will have 2000 euro revenue instead of 1000 euro.
The problem is, if a customer pays in money (add funds) there is no tax on that invoice. But if the customer now buys something with that money and pays the invoice completely with the funds, there is also no tax at the invoice.

We need that asap.. regards
Yes, we need tax on every invoice. The problem is, if a customer adds funds to his account, on this invoice is no tax. If the customer now buys a product and fully pays with credits (funds) there is also no tax.

We need that asap.

Regards from Germany
Which version are you using?

Because I haven't seen that TAXABLE customers/items not being taxed when ordering/automatic renewal.

Please check if you do not have TAX EXEMPT enabled for that customer.

do not complicate it, the rule in EU is pretty simple:
You have got money - you need to make VAT Invoice.
For example "Credit for hosting services"

Then you just need to notify user, that certain amount was substracted from his credit account and user for some services.
You are guys too complicated. It is easy and simple.

In EU - when you got money you have to make invoice. For example - Invoice for credit services.
Then you nee just notify user when you substract money from the account and use it for some services.

I'm also sad that i cannotu use credit system at all.
I found this interesting perspective:

But in those cases payment including tax was completed. The only question is if customer doesn't use the service you have to pay the tax to the government.

Other solution is not to provide an invoice. But just a receipt for the deposit.

At this moment in Sales Tax Liability the complete revenue is credit paid + deposits, so if you only have deposit customers which use their complete deposit during a year, you revenue is 200% and you have to pay profit tax over that.
Did you read the text, it was a copy paste of an alinea of the link included.

Tax point = date issue VAT invoice for the advance payment, date you receive payment.

"An advance payment, or deposit, is a proportion of the total selling price that a customer pays before you supply them with goods or services."

It is the same in most other European countries.

I tried to look it up in European law.