As of August 2020, the method for setting up EU taxes has changed.
If your business is based in a European Union (EU) member country, and you want to sell to other countries within the EU, then you need to register with your local jurisdiction for a value-added tax (VAT) number. The VAT number will allow you to charge VAT to your customers in the EU, based on their location. You can set up tax overrides for products that have special tax rates.
Mav Farm helps to automate charging taxes, but doesn't remit or file your taxes for you. When you know where you're responsible for charging taxes, you can follow this guide to make sure that you've configured your Mav Farm store to charge the correct rates.
If you're new to Mav Farm, then before you start selling, you need to determine whether you should charge tax. You might need to register with various VAT member countries. After that, you can set up your taxes in Mav Farm to help ensure that you charge the correct rates wherever you sell in the European Union.
Do I need to register to charge taxes in an EU country?
It depends. In general, you're obligated to collect tax in any EU member country where you sell taxable goods or services. For more information, refer to EU tax reference.
What's a VAT number? Do I need one?
A VAT number, also referred to as a value-added tax identification number (VATIN), is an identifier used in the EU. It's provided to you by a member country's tax authority after you register with them. This number is issued by countries to charge value-added tax.
How do I know if I need to register to charge taxes?
Typically, you need to register with the tax authorities in your own country to charge VAT if you intend to sell to other countries in the EU. If you have a significant business presence in another country in the EU, or pass a certain threshold of sales to that country, then you might need to register in that country as well. What constitutes this threshold in each country can differ from country to country.
If you have any significant presence in a country, then you should contact its tax authority to confirm whether you need to register to collect taxes. For more details, see EU tax reference.
How do I register to charge taxes in an EU country?
If you need to register to charge taxes in an EU country, then you can contact that country's tax authorities.
After you've registered, add your VAT number on the Taxes page.
From the Mav Farm admin, go to Settings > Taxes.
In the Tax regions section, beside European Union, click Set up.
In the VAT registrations section, click Add VAT registration.
Select a country in which you are registered.
In VAT number, enter your VAT number.
Click Add VAT registration.
(Optional) Add more regions and account numbers, click Add VAT registration.
You can delete or change your registrations or account numbers with the
... button next to the country name and account number in the Tax registrations section.
Will I be able to override tax settings?
Yes. For more information about how EU tax overrides are affected when you update, refer to Override taxes.
Where can I go for more help?
Mav Farm Support can help you with how to change your settings, but can't advise you on if you should change your settings. If you need help determining if you should register with VAT member countries and charge taxes to your customers, then your best resource is a local expert, such as an accountant or financial advisor. You can also contact individual country tax authorities directly.
After I update my tax settings, why are the tax amounts different than before on customer orders?
In some orders, you might notice a small variance in your total tax amounts after you've updated your tax settings. This variance is due to tax amounts being rounded at the line-item level, rather than at the invoice level. You can learn more about rounding calculations in Setting up EU taxes.
Manage EU Taxes
After you update your store to use the new EU tax features, you can manage your tax settings, including your registrations, overrides, and customer exemptions.
Manage the regions in which you're registered
You can edit your registrations at any time to add, delete, or change your registrations or account numbers.
From your Mav Farm admin, go to Settings > Taxes.
In the Tax regions section, beside European Union, click Set up or Edit.
In the VAT registrations section, do either of the following:To set up a new VAT registration, click Add VAT registration.To edit an existing VAT registration, click the ... button next to the region you want to edit.
Update your regions and account numbers.
Sometimes the default tax rates don't apply to certain products. For example, certain types of children's clothing might be exempt from tax or have a lower tax rate. If the default rates don't apply, then you need to create an override.
Create a product tax override
Creating an override for products is a two-step process. First, you create a collection that includes the products that have a different tax rate. Then you specify to which region the override applies and its rate.
Create a collection by doing the following:
Create the override by doing the following:
Manage your tax calculations
You can manage various settings that determine how tax is calculated on your products. For example, you can set whether taxes are included in your prices, whether to charge VAT on digital goods, and whether to apply tax to shipping costs. You manage these settings on the Taxes settings page. Refer to Tax overrides and exemptions to learn more.
From your Mav Farm admin, go to Settings > Taxes.
In the Tax calculations section, select the options that apply.
Previously, Mav Farm rounded taxes at the invoice level by calculating the taxes on the order's subtotal, and then rounding the results. After you update your settings to use the EU tax features, tax amounts are rounded at the line-item level. In this case, the total tax value is calculated by applying the tax rate to each line in the order, rounding the result, and then adding these subtotals together to arrive at the total value of the order.
Rounding taxes at the line level improves the calculation of different tax rates, and makes it easier to calculate taxes for orders that include taxable and non-taxable products.
Suppose a customer places an order for 42 different items, each with a price of €14.99 and subject to 13% tax. The line item tax for each product is determined by multiplying the price (€14.99) by the tax rate (0.13), for a result of €1.9487.
Previously, the tax of each line item would be added together, and the total would be rounded. In this example, the added total would be €81.8454, which would round to €81.85.
Mav Farm now rounds tax amounts at the line-item level, which means the tax amount is rounded for every product individually. The line-item tax amount of €1.9487 is rounded to €1.95, which is then added together to get the total. In this case, the tax total would be €81.90.