VAT acc. to shipping address

[prestamax]

Hi, I want to sell internationally and within Europe there are different VAT zones. I have enabled VAT based on shipping address.

 

If a customer is located in let's say Austria VAT would be 20%. Do I need to add all VAT percentages manually in order to charge VAT based on shipping address? If so ... how can I do this?

Thanks for any help on this.

[Dave L]

You wouldn't use the VAT of a different country to that you are selling from.

 

If you are selling from the UK for example and assuming you are VAT registered, you would charge 20% VAT on sales in the UK and within the EU.

 

If you sell to countries outside of the EU then you wouldn't charge VAT at all.

[prestamax]

But according to the EU regulation I would have to charge the VAT of the recipient's country. So if I am in the UK and would sell to France I would charge 19.6% only. If selling to Poland I would have to charge 23%. It's the same if buying at amazon. They charge according to the shipping address (sometimes more, sometimes less ... depends of the vat percentage in the country where you want the item to be shipped to).

[leonidnk]

You wouldn't use the VAT of a different country to that you are selling from.

 

If you are selling from the UK for example and assuming you are VAT registered, you would charge 20% VAT on sales in the UK and within the EU.

 

If you sell to countries outside of the EU then you wouldn't charge VAT at all.

Yes, you are right, but not completely. If you sell goods to some EU country over some (this country specific) threshold level (see http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/traders/vat_community/vat_in_ec_annexi.pdf), you have to register your company in this country, get this country VAT number and sell goods to this country according their VAT.

[prestamax]

I have added all EU Vat percentages (phew .. quite a number). Then I created a tax rule and called it "EU". Here I added the relevant tax percentage to each EU country and saved this rule. But the tax isn't calculated based on the recipients shipping address. The tax rule is activated as well as all taxes. What am I doing wrong?

[Dave L]

Yes, you are right, but not completely. If you sell goods to some EU country over some (this country specific) threshold level (see http://ec.europa.eu/...n_ec_annexi.pdf), you have to register your company in this country, get this country VAT number and sell goods to this country according their VAT.

 

Indeed, you are absolutely correct. However, it's unlikely that many prestashop users would fall into this category and if they do operate at this sort of level, I would think they would have a much better grasp of sales taxation for the areas in which they operate.

 

Just to correct a slight error in my earlier post, sales to countries outside of the EU would have VAT charged but it would be 'zero' rated (0%) and would need to be accounted for and evidenced when completing the VAT tax return.

[Dave L]

But according to the EU regulation I would have to charge the VAT of the recipient's country.

 

EU regulation does not state you have to charge VAT of the recipient country. If you are in the UK and sell to any other EU country you would charge UK VAT, currently 20%.

 

So, to use your example, if you are operating from the UK (and are VAT registered) and you sell to France you would charge VAT on the UK rate of 20%, not the French rate of 19.6%. The same would apply with a sale to Poland, you would charge VAT at the UK rate of 20%.

 

 

I have added all EU Vat percentages (phew .. quite a number). Then I created a tax rule and called it "EU". Here I added the relevant tax percentage to each EU country and saved this rule. But the tax isn't calculated based on the recipients shipping address. The tax rule is activated as well as all taxes. What am I doing wrong?

 

 

I think you are creating yourself a lot of unnecessary work. I am not being negative towards your post, just trying to be helpful. You did not need to enter all this data in your set up. The taxation settings are not working as you were expecting as your understanding of how it should work is flawed.

 

 

If your sales to other EU countries exceed the thresholds (as indicated in the link provided by leonidnk above) which is unlikely as selling in this manner would not be a sensible business model, then you do not need to go to the trouble of adding all these VAT %'s.

 

I am assuming, reading between the lines, that you are in the UK. Here's a link that will help you better understand the VAT on implications of selling to countries outside your own. While this is aimed at UK businesses, the same, or at least very similar VAT rules would apply across the EU with only the threshold values differing country to country.

 

If you are selling goods and charging VAT then you must have a good understanding of the VAT system works to ensure you do not unintentionally get yourself into trouble. Remember, you are both responsible and accountable for this. In cases were you have charged less than 20% VAT you are liable for the shortfall. In cases where you have charged over 20% VAT you are in fact overcharging your customers VAT which is quite a serious offence. You would be well advised to seek advice from your accountant before implementing any VAT collections.

 

As an aside, if you are not VAT registered then you cannot charge VAT at all and doing so would be illegal.

[leonidnk]

...which is unlikely as selling in this manner would not be a sensible business model...

Why it is a not sensible business model? Just look on http://www.bike24.com/, they are registered in Sweden and sell to Sweden with 25% VAT.

[prestamax]

EU regulation does not state you have to charge VAT of the recipient country. If you are in the UK and sell to any other EU country you would charge UK VAT, currently 20%.

 

So, to use your example, if you are operating from the UK (and are VAT registered) and you sell to France you would charge VAT on the UK rate of 20%, not the French rate of 19.6%. The same would apply with a sale to Poland, you would charge VAT at the UK rate of 20%.

 

I just googled a bit and you may be right. If the treshold is below Eur 100,000 you may charge your domestic VAT rate.

 

I found this at Wikipedia

 

When a vendor in one member state sells goods directly to individuals and VAT-exempt organisations in another member state and the aggregate value of goods sold to consumers in that member state is below €100,000 (or the equivalent, e.g. in the UK as of 2010 it is £70,000) in any 12 consecutive months, then such a sale of goods may qualify for a distance sales treatment.^[21] Distance sales treatment allows the vendor to apply domestic place of supply rules for determining which member state collects the VAT.^[21] This means that VAT is charged at the rate applicable in the exporting member state. However, there are some additional restrictions to be met. For instance, supply of new motor vehicles like cars, trucks and boats does not qualify.^[22] As well, a compulsory VAT registration is required for a supplier of excisable goods to the UK (like tobacco and alcohol).

If sales to final consumers in a member state exceed €100,000, the exporting vendor is required to charge VAT at the rate applicable in the importing member state. If a supplier provides a distant sales service to several EU member states, a separate accounting of sold goods in regards to VAT calculation is required. The supplier then must seek a VAT registration (and charge applicable rate) in each such country where the volume of sales in any 12 consecutive months exceeds local threshold.

 

 

Only if the value exceeds Eur 100,000 the VAT rules applies to charge VAT of the recipients country (what a relief ! ). I am not in this price range yet

 

Now I need to figure out how to exempt non-EU buyers from the tax ...

[Dave L]

Why it is a not sensible business model? Just look on http://www.bike24.com/, they are registered in Sweden and sell to Sweden with 25% VAT.

 

Of course they sell with 25% VAT, it's the country they operate in and sell to. Why wouldn't they?

 

If you are in the UK and were to purchase from them they would also charge you 25% VAT. They wouldn't charge 20% VAT because you are in the UK though.

[prestamax]

 

 

If you are in the UK and were to purchase from them they would also charge you 25% VAT. They wouldn't charge 20% VAT because you are in the UK though.

 

If buying for example at amazon UK you will be charged acc. to your domestic VAT rate if you are not in the UK. But amazon's selling volume exceeds Eur 100,000 so they are required to do so.

 

P.S. I am still wondering why there is a setting in prestashop to charge VAT according to shipping address if it doesn't work

[Dave L]

 

If buying for example at amazon UK you will be charged acc. to your domestic VAT rate if you are not in the UK. But amazon's selling volume exceeds Eur 100,000 so they are required to do so.

 

Yes, I would think this is indeed the case.

[leonidnk]

 

Of course they sell with 25% VAT, it's the country they operate in and sell to. Why wouldn't they?

 

If you are in the UK and were to purchase from them they would also charge you 25% VAT. They wouldn't charge 20% VAT because you are in the UK though.

No, the are operated in Germany in Dresden. But they sell a lot to Sweden and have to be registered in Sweden too.

Why it is a not sensible business model?

[prestamax]

No, the are operated in Germany in Dresden. But they sell a lot to Sweden and have to be registered in Sweden too.

 

 

Yes, you are right. In the footer there is an option to change the country where you want the item to be shipped to and the price changes accordingly. Interesting ...

[Dave L]

No, the are operated in Germany in Dresden. But they sell a lot to Sweden and have to be registered in Sweden too.

Why it is a not sensible business model?

 

You stated "they are registered in Sweden and sell to Sweden with 25% VAT." I had assumed you knew this as fact. I didn't bother to look.

 

Now I have looked it appears that in some cases this company is charging VAT at the recipients country rate. In most other EU countries they ship to they are charging VAT at the German rate (19%) including sales to the UK. It is also clear that there is no VAT being added to countries outside of the EU. This indicates to me that they are indeed registered for VAT in the countries where they are charging that countries VAT rate.

 

 

When I mentioned 'business model' I was eluding to a UK company exceeding the mentioned thresholds without being registered for VAT in that country. If I hadn't explained this clearly enough I apologise. You seem to be pushing a point about this without actually contributing anything.

 

Do you have any advice to offer?

[leonidnk]

When I mentioned 'business model' I was eluding to a UK company exceeding the mentioned thresholds without being registered for VAT in that country. If I hadn't explained this clearly enough I apologise. You seem to be pushing a point about this without actually contributing anything.

 

Do you have any advice to offer?

No. I just been interested why you call a such business model as "not sensible". I self sell over the threshold to Norway, but fortunately Norway is outside of EU.