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Stripe subscription and VAT handling
The document provides an overview of how Lingohub manages subscriptions through Stripe, detailing the process of creating customer accounts, assigning subscription plans, and handling changes such as upgrades, downgrades, and billing intervals. It specifies that invoicing occurs at the beginning of each billing cycle and outlines the implications of subscription changes, including cancellation policies and tax rate adjustments. Additionally, it stresses the importance of proper handling regarding subscription IDs during invoice creation to ensure accurate billing.
Stripe subscription and VAT handling
- 1. AND VAT HANDLING https://lingohub.comMADE WITH BY LINGOHUB STRIPE SUBSCRIPTION
- 2. STRIPE IN ANUTSHELL − REST API that is well documented and easy to use − Create a customer and assign a subscription plan which has to be defined up front − Main properties of a subscription plan on Stripe: − Subscription plan name − Amount to charge − Payment interval (e.g. monthly vs. annually) − Currency https://lingohub.com MADE WITH BY LINGOHUB ⟶ Currency is a customer property. Once a customer has been created and a currency has been set, it can’t be changed anymore and only plans of which currency matches the customer account can be assigned.
- 3. STRIPE IN ANUTSHELL − When creatinga subscription for a customer an accordingplan and additional subscription propertieslike the followingcan be defined: − Optional trial period which determines when the first payment will be made − Optional tax rate which is applied to all invoices created for that subscription https://lingohub.com MADE WITH BY LINGOHUB
- 4. WITH STRIPE https://lingohub.com MADEWITH BY LINGOHUB HANDLING SUBSCRIPTION CHANGES
- 5. HANDLING SUBSCRIPTION CHANGESWITH STRIPE − Once a subscription is created a customer will be automaticallybilled by Stripe − Once a payment is done Stripe delivers a web hook notification which we use to generate invoices − What happens if the subscription changes? 1. The subscription may be terminated at any time 2. The customer may want to upgrade to a new plan 3. The customer may want to downgrade to a cheaper plan 4. The customer may want to switch to a different payment interval (e.g. monthly to annually) 5. The VAT rate for the customer may change for various reasons https://lingohub.com MADE WITH BY LINGOHUB
- 6. HOW STRIPE HANDLESSUBSCRIPTION PER DEFAULT − Per default customers are invoiced only at the beginning of each predefined billingcycle − All relevant changes in between are collected and will be considered at the beginning of the next billingcycle − This has some considerable implications: − Payments are not attempted until the billing cycle ends. If a customer (annual billing) upgrades to a bigger plan at the beginning of a cycle, you’ll have to wait for the payment being made for a long time. − You can only define a single tax rate which is applied to all items on an invoice. If you sell goods requiring different tax rates it’s not possible to summarize them in a single invoice. − In case the billing frequency changes an invoice is created because a new billing cycle starts. https://lingohub.com MADE WITH BY LINGOHUB
- 7. HOW WE HANDLESUBSCRIPTION CHANGES 1. Subscription cancellation As stated in our terms of use we don’t grant refunds in case a customer cancelshis subscription with LingoHub. As payments are usually made up front we simply cancel the subscription immediately. In this case it can be necessary to create a final invoice for all pending charges. https://lingohub.com MADE WITH BY LINGOHUB
- 8. HOW WE HANDLESUBSCRIPTION CHANGES 2. Upgrading to a bigger plan When a customer upgrades we manuallytrigger an invoice creation for his subscription because − we don’t want to wait for the payment to be made at the end of the current cycle. − we only want to include charges related to the subscription change. (Other items require a different tax rate.) − if the customer cancels the subscription before the billing cycle ends we’d have to create a final invoice which could delay the cancellation process as we’d have to wait for the payment before deleting the account. https://lingohub.com MADE WITH BY LINGOHUB ⟶ You have to make sure that the subscription ID is provided when creating the invoice, otherwise all pending items are added to the invoice and the tax rate defined on the subscription wouldn’t be considered.
- 9. HOW WE HANDLESUBSCRIPTION CHANGES 3. Downgrading to a smaller plan This change is generallyhandled as upgrading to a bigger plan. In this case a customer may receive a credit as he alreadypaid for a bigger plan up front and there may be time remainingon that bigger plan. An accordingbalance is added to the customer’s account on Stripe and automaticallyconsidered when generating future invoices. https://lingohub.com MADE WITH BY LINGOHUB
- 10. HOW WE HANDLESUBSCRIPTION CHANGES 4. Changing the payment period The plan change involves switching to a different billingcycle. Stripe creates an invoice immediatelyas a new cycle is started. In this case we also enable proration to ensure that remainingtime from the old billing cycle is considered. https://lingohub.com MADE WITH BY LINGOHUB
- 11. HOW WE HANDLESUBSCRIPTION CHANGES 5. Changing the tax rate for a subscription The VAT rate needs to apply to subscriptionsand depends on the country where the customer comes from or his business is registered. The tax rate might have to be updated if the country(billing info) changes or a valid VAT registration number is added/removed. The tax rate on the existing subscription has to be updated and the new rate will be applied to future invoices. https://lingohub.com MADE WITH BY LINGOHUB
- 12. BROUGHT TO YOUBY LINGOHUB ANJA OBERMÜLLER BUSINESS DEVELOPMENT& MARKETING AT LINGOHUB anja.obermueller@lingohub.com @LingoHub @anjaobermueller Read the whole article. https://lingohub.com MADE WITH BY LINGOHUB