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Simplified VAT Tax Guide After Brexit

The following information is a simplified guide to help your business understand and handle the new VAT rules after Brexit. The guide is based on the latest Storefront v17 using standard tax calculation. Please note, Revindex Storefront is integrated with multiple tax providers that you can choose from including Avalara, TaxJar and Zip2Tax that can perform more accurate automatic tax calculation.  Always consult your tax specialist for up-to-date information on your exact tax requirements.

Brexit officially occured on Jan 31, 2020, but companies have up to Dec 31, 2020 to comply with the new VAT rules.

General UK and EU VAT Rules

 

Company based in UK

Company based in EU

Company based outside UK and EU

Selling to UK

  • Register for UK VAT number
  • Charge 20% VAT for B2C
  • No charge for B2B when VAT number provided (reverse charge applies only to foreign country)
  • Show all VAT information on your invoice
  • Register for UK VAT number
  • Charge 20% VAT for B2C
  • No charge for B2B when VAT number provided (reverse charge applies only to foreign country)
  • Show all VAT information on your invoice
  • Register for UK VAT number
  • Charge 20% VAT for B2C
  • No charge for B2B when VAT number provided (reverse charge applies only to foreign country)
  • Show all VAT information on your invoice

Selling to EU

  • Register for EU VAT number in any EU country (e.g. Ireland if operating in English)
  • Charge the VAT rate based on the customer location for B2C
  • No charge for B2B when VAT number provided (reverse charge applies only to foreign country)
  • Show all VAT information on your invoice
  • Register for EU VAT number in your own EU country
  • Charge the VAT rate based on the customer location for B2C
  • No charge for B2B when VAT number provided (reverse charge applies only to foreign country)
  • Show all VAT information on your invoice
  • Register for EU VAT number in any EU country (e.g. Ireland if operating in English)
  • Charge the VAT rate based on the customer location for B2C
  • No charge for B2B when VAT number provided (reverse charge applies only to foreign country)
  • Show all VAT information on your invoice

Configuration for Selling in Europe

If you only sell in the UK and/or EU, we recommend the following setup.

First, under Configuration > General settings, select your Allowed countries (pick UK and/or EU countries).

Under Configuration > Taxes settings, add a new tax method. 

  1. Give it any name (e.g. "VAT") and you probably want to set this as your default tax method.
  2. Set the Type = "Custom Rate" and Rate rule = "Europe VAT MOSS".
  3. Verify the VAT rates are accurate for each country by comparing with actual EU published VAT rates.
  4. Save. Make sure your products are set to use this tax method.

To support B2B transactions, you can exempt taxes either by registering the business user ahead of time or allow them to request it at the moment of checkout.

To exempt taxes ahead of time, you will need to register the business user manually and contact them to provide you with their VAT number. Typically, you want to validate the number with the official VAT registry. Once validated, enter the number into the Tax exemption number 1 field and select the Tax exempt 1 checkbox under the People > Customers menu. 

To allow business users to request exemption at the moment of checkout, you need to enable the "Show business tax number" under Configuration > Checkout settings. In addition, you want to enable the "Validate business tax number" under Configuration > Sales order settings. If the customer enters a valid VAT number during checkout, the order will be exempted from taxes.

Configuration for Selling in Any Country

If you sell in North America, the UK and/or EU or any other country, we recommend the following setup.

First, under Configuration > General settings, select your Allowed countries.

Under Configuration > Taxes settings, add a new tax method. 

  1. Give it any name (e.g. "Goods") and you probably want to set this as your default tax method.
  2. Set the Type = "Custom Rate", Rate rule = "Regional rate" and Match address type = "Billing"
  3. Add all the regions you support (select the Country and Regions). For example, the following table shows sample tax rates for the U.S, Canada, UK and EU:
     
    Country Region Tax level 1 Tax level 2
    United States California   7.25%
    United States New York   4%
    Canada Ontario 5% 13%
    Canada Quebec 5% 15%
    United Kingdom Any 20%  
    Austria Any 20%  
    France Any 24%  
  4. Save. Make sure your products are set to use this tax method.

To support B2B transactions, you can only exempt taxes by registering the business user ahead of time. You will need to register the user manually and contact them to provide you with their VAT number. Typically, you want to validate the number with the official VAT registry. Once validated, enter the number into the Tax exemption number 1 field and select the Tax exempt 1 checkbox under the People > Customers menu.