PayPal vs Polar: fees, sales tax and plan pricing for founders selling software from Egypt or the Gulf
PayPal is a general-purpose payment processor and buyer wallet; Polar is a merchant of record for software, digital products and subscriptions. Fees on the same sale, what Polar's Starter and Pro plans change, who handles sales tax and VAT, and who can open each account.
The short answer
PayPal is a general-purpose payment processor and buyer wallet. It moves the money, lets buyers pay from a PayPal account they already hold, and leaves your business as the seller, responsible for any sales tax or VAT. Polar is a merchant of record built for developers selling software, digital products and subscriptions. A merchant of record is the company that legally sells to your customer: the sale is made in its name, it calculates, collects and remits sales tax or VAT, and it pays you what remains after its fees.
On a $100 sale paid with a US card, as published on 28 September 2026, PayPal Checkout takes $3.98 and Polar's free Starter plan takes $5.50, a difference of $1.52. Polar's paid plans lower the per-sale rate in exchange for a monthly fee, so the gap depends on your volume.
The deciding factor is tax and product type more than the rate. If you sell software or digital products to buyers in many countries and do not want to register for and file sales tax or VAT yourself, Polar's higher fee pays for that. If you sell services or a mix of products, or your buyers expect a PayPal button, PayPal fits better and tax compliance stays with you.
How they differ at a glance
All figures are for a US account settling in USD, as published on 28 September 2026.
| PayPal | Polar | |
|---|---|---|
| Type | Payment processor and buyer wallet | Merchant of record for software, digital products and subscriptions |
| Standard rate | PayPal Checkout 3.49% + $0.49; standard card processing 2.99% + $0.49 | Starter 5% + $0.50; Pro 3.8% + $0.40; Growth 3.6% + $0.35; Scale 3.4% + $0.30 |
| International cards | +1.5% | +1.5% on all plans |
| Currency conversion | Built into PayPal's exchange rate, roughly 3–4% above the base rate | No conversion charge to the merchant in our model |
| Subscriptions | Recurring payments; no surcharge in our figures | Built in; no separate subscription fee on the new plans |
| Sales tax / VAT | Your business | Polar, as merchant of record |
| Payouts | Standard bank transfer free; instant transfer 1.75% (max $25) | Through Stripe Connect at cost: $2 per month with a payout, plus 0.25% + $0.25 per payout; cross-border 0.25%–1% |
| Disputes | Chargeback fee set per currency; waived under Seller Protection | $15 regardless of outcome |
| Monthly fee | None on the standard account | Starter $0, Pro $20, Growth $100, Scale $400 |
| Who can open | Businesses in PayPal's countries; a US LLC can apply for a US Business account | Sellers in many countries who can receive Stripe Connect payouts |
Fees on the same sale
The table uses PayPal Checkout for PayPal and the Starter plan for Polar. "Intl" means a card issued outside the US; "+ FX" means the buyer pays in another currency and the gateway converts.
| Scenario | PayPal (Checkout) | Polar (Starter) |
|---|---|---|
| $100 US card | fee $3.98 / net $96.02 | fee $5.50 / net $94.50 |
| $100 intl card | fee $5.48 / net $94.52 | fee $7.00 / net $93.00 |
| $100 intl card + FX | fee $8.48 / net $91.52 | fee $7.00 / net $93.00 |
| $100 intl subscription | fee $5.48 / net $94.52 | fee $7.00 / net $93.00 |
| $29 US subscription | fee $1.50 / net $27.50 | fee $1.95 / net $27.05 |
| $29 intl subscription | fee $1.94 / net $27.06 | fee $2.39 / net $26.61 |
| $1000 intl card | fee $50.39 / net $949.61 | fee $65.50 / net $934.50 |
| Charge needed to net $100 (US card) | $104.12 | $105.79 |
Most of the gap comes from the base rate: 5% + $0.50 on Starter against 3.49% + $0.49 on PayPal Checkout. Both add 1.5% for international cards, so the difference holds at $1.52 on a $100 international sale and grows with the sale size, to $15.11 on $1,000. The one row where Polar Starter nets more is the international sale paid in another currency. PayPal's conversion is built into its exchange rate (our calculator uses 3%), which raises its fee to $8.48, while in our model Polar does not charge the merchant for conversion, so its fee stays at $7.00.
These are transaction fees only. They leave out payout costs, disputes, and, on the PayPal side, the work and cost of handling sales tax or VAT yourself. To run your own prices and volumes, use the PayPal fee calculator, the Polar fee calculator or the payment gateway fee comparison.
PayPal in practice
PayPal is a payment processor: it collects the buyer's payment and pays it to your account, and your business remains the seller of record for tax purposes. Its main advantage is the buyer side. Someone who already has a PayPal account can pay with the PayPal button without typing card details, and that familiarity can matter for a first purchase from a small or unknown seller.
On the US fee page, the PayPal button and PayPal Checkout cost 3.49% + $0.49, standard card processing costs 2.99% + $0.49, and advanced (unbranded) card processing costs 2.89% + $0.29. Venmo and Invoicing are 3.49% + $0.49. International transactions add 1.5%, and currency conversion is priced into the exchange rate, roughly 3–4% above the base rate. There is no monthly fee on the standard account, standard transfers to a bank are free, and an instant transfer costs 1.75% up to $25.
The limits are about what PayPal does not do. It does not become the seller, so if your sales create a sales tax or VAT obligation in a US state or another country, registering, collecting and filing is your responsibility. Disputes carry a chargeback fee set per currency, waived where Seller Protection applies. And the rates above are the US rates; an account opened in another country follows that country's fee page.
Polar in practice
Polar is a merchant of record aimed at developers who sell software, digital products and subscriptions. Because Polar is the seller of record, it handles sales tax and VAT on your sales, and it is built around what software sellers need: checkout, subscriptions, and product benefits such as license keys and file downloads. Check Polar's own documentation for the current list of benefits and for the product types it accepts; a merchant of record decides what it will sell on your behalf, and services or physical goods may not fit.
Pricing is plan-based for organisations created from 27 May 2026, as described in Polar's plans announcement and pricing page: Starter is free at 5% + $0.50, Pro is $20 a month at 3.8% + $0.40, Growth is $100 a month at 3.6% + $0.35, and Scale is $400 a month at 3.4% + $0.30. All plans add 1.5% for international cards, and the new plans have no separate subscription fee. Organisations on the legacy Early Member terms pay 4% + $0.40 plus 0.5% on subscriptions.
Starter versus Pro. Pro takes 1.2 percentage points and $0.10 less per transaction. On a $100 US-card sale that brings the fee from $5.50 to $4.20, a saving of $1.30 per sale, so Pro covers its $20 monthly fee at about 16 such sales a month (roughly $1,540 in volume at that price). On a $29 US subscription, Pro's fee is $1.50 against Starter's $1.95, a saving of $0.45, so it takes about 45 subscriptions a month to cover the $20. Below those points Starter costs less overall. Even on Pro, PayPal Checkout's $3.98 is lower on a $100 US-card sale, before counting Pro's monthly fee; Polar's case rests on the tax work it takes over, not on price. These plan figures are our arithmetic from the published rates; the fee documentation is the reference.
Other costs sit outside the transaction fee. Payouts go through Stripe Connect at cost: $2 in any month with a payout, plus 0.25% + $0.25 per payout, and 0.25%–1% when the payout is cross-border. Disputes cost $15 whatever the outcome, and transaction fees are not returned when you refund a customer.
Who can use each one from Egypt or the Gulf
PayPal operates personal and business accounts in Egypt, with limits on receiving and withdrawing money; PayPal in Egypt explains how withdrawals work there, and the Egypt merchant fees page lists the local rates, which are not the US rates in this article. For Saudi Arabia, the UAE and the rest of the Gulf, check the country on PayPal's worldwide list and that country's own fee page. A US LLC can apply for a US PayPal Business account at the US rates above.
Polar onboards sellers from many countries, but the exact list must be checked on Polar's site. Because Polar pays out through Stripe Connect, you must be able to receive Stripe Connect payouts in your country. That is a separate question from whether you can open your own Stripe account, so confirm it with Polar before you build your checkout around it.
A US LLC with a US bank account is what opens the US-priced accounts described here. Foundlie forms the US LLC and obtains the EIN; each provider still decides on your account after its own review, and approval is never guaranteed.
Which one to choose
Choose PayPal if:
- Your buyers already use PayPal and you want the PayPal button at checkout.
- You sell services, client work or anything outside software and digital products.
- You are ready to handle sales tax or VAT yourself, or your sales do not create those obligations.
- Low per-sale cost on US-card payments matters more to you than tax handling.
Choose Polar if:
- You sell software, digital downloads, license keys or subscriptions to buyers in many countries.
- You do not want to register for, collect and file sales tax or VAT in each place you sell.
- Many of your buyers pay in other currencies, where PayPal's conversion spread raises its fee above Polar Starter's.
- Your volume is high enough for Pro or a higher plan to lower the per-sale rate.
Using both can make sense when one business sells two kinds of things: Polar for software and subscriptions, where the tax handling pays for itself, and PayPal Invoicing (3.49% + $0.49) for client work billed by invoice. Keep the tax position of each channel clear, because the PayPal side remains your responsibility.
Frequently asked questions
Which is cheaper for a $29 monthly subscription?
For a US card, PayPal Checkout takes $1.50 and Polar Starter takes $1.95, as published on 28 September 2026. On Polar Pro the fee is $1.50, but Pro costs $20 a month. For an international card, PayPal takes $1.94 and Polar Starter $2.39. The comparison ignores sales tax: with PayPal, any tax obligation is yours to handle; with Polar, it is included.
When does Polar's Pro plan pay for itself?
Pro saves 1.2 percentage points and $0.10 per sale against Starter. At $100 per sale that is $1.30 a sale, so about 16 sales a month cover the $20 fee; at $29 per subscription it is $0.45 a sale, so about 45 subscriptions a month. Run your own numbers in the Polar fee calculator.
Does PayPal collect sales tax or VAT for me?
No. PayPal is a payment processor, not a merchant of record, so your business remains the seller. If your sales create a tax obligation in a US state or another country, registering, collecting and filing it is your responsibility.
Can I use PayPal or Polar without a US company?
PayPal operates accounts in Egypt and other countries at local rates and with local limits; the US rates in this article apply to a US account. Polar onboards sellers from many countries, provided they can receive Stripe Connect payouts; check both on the providers' own pages. A US LLC is one route to the US-priced accounts, not a requirement for every seller.
Does Polar return its fee when I refund a customer?
No. Polar's published terms say transaction fees are not returned on refunds, and a dispute costs $15 regardless of the outcome.
What comes next
- See how payment accounts, payouts and provider reviews fit together on accepting payments from abroad.
- Model your own sales with the PayPal fee calculator, the Polar fee calculator and the payment gateway fee comparison.
- If you already use PayPal from Egypt, read PayPal in Egypt: withdrawals, fees and limits.
- Compare Polar with a processor that has no monthly plans in Stripe vs Polar, or with another merchant of record in Dodo Payments vs Polar.
- If you need the US LLC first, start with US company formation.