Latvala led a superb performance from the Toyota team with Esapekka Lappi finishing fourth in just his second WRC event with the team while Juho Hanninen was sixth.
Thierry Neuville completed the podium in his Hyundai to draw with 18 points of championship leader Sebastien Ogier, who was fifth.
Paddon crashed out from the lead on day two but restarted under Rally 2 rules. He proved quick again on the final day but made another basic error to leave him scratching his head.
"After Saturday's misfortune, we wanted to use today to get back into a rhythm," the 30-year-old said.
"Things started out well with a stage win, but that was the extent of our positives from today. In the penultimate stage, we had another very strange incident on a 'nothing' corner, where like yesterday I clipped the inside, which sent us wide.
"I don't know why this is happening. I am incredibly disappointed in myself and for the team. I want to learn from this but at the same time put it behind us and look ahead to Poland."
Final Results
Ott Tanak (Ford)
Jari-Matti Latvala (Toyota) +12.3s
Thierry Neuville (Hyundai) +1:07.7s
Esapekka Lappi (Toyota) +2:12.9s
Sebastien Ogier (Ford) +3:25.3s
Juho Hanninen (Toyota) +3:38.5s
Championship Standings
Sebastien Ogier 141
Thierry Neuville 123
Ott Tanak 108
Jari-Matti Latvala 107
Dani Sordo 72
Elfyn Evans 53
Craig Breen 43
Hayden Paddon 33
