Setting up VAT
Some countries charge a value added tax, or VAT, on goods and services. (In some countries this is referred to as a goods and services tax, or GST.)
There can be different VAT rates depending on which stage you as a merchant are at in the manufactuer or distribution of the products, materials, or services that you sell to your customers. In this case you may need to use more than one VAT rate in your store for tax calculation purposes.
Applying VAT requires familiarity with tax rule creation. We illustrate how to create tax rules in detail here.
Set Up Customer Tax Class
From Set-up > Tax > Customer Tax Classes, select or create a tax class to use for your VAT rate. We recommend adding a class titled "Retail Class" if you don't have one yet. Click Save when you are done.
Set up Product Tax Class
From Set-up > Tax > Product Tax Classes, click Add New.
Then, add three classes with the following titles:
- VAT Standard
- VAT Reduced
- VAT Zero
When you finish, click Save.
Set Up Tax Zones and Rates
From Set-up > Tax > Tax Zones & Rates, Add New Tax Rates.
From Tax Rate Information, add new rates, paying special attention to the following fields:
Tax Identifier | Name of the tax rate. |
Country | Name of the country represented by the VAT rate. |
Rate Percent | Current VAT Rate. |
When you finish, click Save.
Create a VAT Tax Rule
A tax rule is a combination of a customer tax class, product tax class, and tax rate. From Set-up > Tax > Tax Rules, click Add Tax Rule.
Then, add in the following values:
VAT Standard
Name | VAT Standard |
Customer Tax Class | Retail Customer |
Product Tax Class | VAT Standard |
Tax Rate | VAT Standard Rate |
VAT Reduced
Name | VAT Reduced |
Customer Tax Class | Retail Class |
Product Tax Class | VAT Reduced |
Tax Rate | VAT Reduced Rate |
Apply VAT Tax Classes To Products
From Catalog > Products, select a product for your VAT tax class.
Then, from General Information, select the corresponding tax class you created for VAT from the Tax Class menu.
Before Proceeding
Make sure to find out the rules, regulations, and rates for VAT in your area.
Updated 12 months ago