In this article, you will find how to set up taxes in your CloudCart store.
In this section:
In order to charge VAT to some customers and not to others, you need to set a Global and Local VAT rate at your CloudCart store. This means that all customers no matter whether they are from will see the VAT rate at the cart or checkout steps.
But if a customer enters a foreign VAT number (for ex. Hungarian) upon checkout, CloudCart will try to validate this number and if it is valid, then the VAT rate will be automatically removed from the total amount of the order. The system knows which countries are part of the European Union. The service we are using is https://ec.europa.eu/taxation_customs/vies/- VIES.
Please note that even if the customer has entered a local delivery address, but with a foreign VAT number in his invoice data, then regardless of the fact that the goods will be delivered to a recipient in your country, the VAT rate of the products in this order will be removed upon checkout. IMPORTANT: The system removes VAT, only on the basis of the billing address entered in the invoice data. It will NOT BE removed, based only on the delivery address. Example: If a customer enters a foreign address in the delivery address field, but has not entered a valid VAT number and a foreign address in the invoice data, the system will not remove the VAT.
Let’s set over to settings!
Set up Taxes
1. Log into your Admin panel, go to Settings > Taxes and click on Add tax button in the upper right corner of the screen. This button will allow you to add Global or Local tax for a specific region.
Please note, that if you haven't added a Global Tax and add a Local Tax first, the Global tax will be automatically added to the tax list.
2. In the window that appears, enter a name (Local VAT, Global VAT rate, etc.) and a description of the tax you are adding in the corresponding fields. This information will be visible to your customers.
3. In the "Rate" section set the percentage amount of the tax.
4. In the section "Prices include taxes" you should take into account whether your store operates in the European Union and who are you selling to - companies (B2B) or end-customers.
- If you enabled the button this means that all prices which a customer sees in the storefront are with included VAT.
- If the option is disabled, the prices which the customers will see in the storefront will be without VAT. The VAT will be added to the products' prices when a customer reaches the last step of completing his order in the store, upon checkout.
If you sell goods only to businesses you don't have to charge VAT on your sales. But if you sell to both - companies (B2B) and end-customers you need to add VAT. The most important distinction when it comes to charging VAT and generating invoices in your store is whether your business is VAT registered or not. When your turnover exceeds the threshold for VAT registration of the country in which you operate, you are obligated to register your company. You are also subject to registration when your company supplies goods and services in another EU Member State. See more for EU taxes.
5. In the next field you should choose whether to calculate tax before shipping costs or after them.
- If you have chosen to collect the delivery fee from the customer by yourself, this amount is subject to VAT and you must select the option of the tax to be calculated after the shipping costs.
For manually set delivery methods (those that are not integrated) the delivery price is always taxed with VAT.
- If you are not responsible for collecting the delivery fee from your customers (most often this is the case when you have integration with some payment methods) you should NOT charge VAT on the shipping price. In this case, select the option of the tax to be calculated before shipping costs.
6. The "Tax regions" section is where you determine whether the tax will be Global or Local from the button ON/OFF. If you disabled the button and the Tax is for a specific region, from the drop-down menu, you can select the desired one.
If you do not see the region you want to select, you must first create a Geo Zones from the Settings section.
7. "Grounds for non-accrual of VAT" - in this field you have to add a text, describing why you are not charging VAT. For example if you sell only to other businesses outside your own country you are not obligated to charge VAT.
8. In the last sections "Exceptions by regions" and "Exceptions by categories" you can override tax rates by clicking on Add override.
In addition to the category, it is possible to select a region that will serve to further define the exception. If a product belongs to this category (and region), the exception tax will be applied to it. If two products from different categories have been added to the shopping cart, the two tax rates that apply will be visible. If there is a common discount for the selected products, it will be calculated separately for each product and the corresponding tax rate for each product will be imposed on the result.
In some cases, the VAT rate depends on the type of goods you are selling. The tax that you apply can be specified according to the product category. It is possible to provide a lower/higher tax than the standard one, which will only be valid for one or more categories.
An example of such a case is the reduced tax on all goods in the category "Books" with a lower VAT rate in most countries. You can check the VAT rates for the different product categories applicable in each country here*. *There may be a change/decrease in the rate of VAT for some products mentioned in this file in different countries, due to COVID-19. Always check with a local tax authority to make sure that you are charging your customers the correct tax rates.
Selling only in one country
If you want to sell in only one country, you must remove the automatically generated Global tax and save only the Local tax, as well as specify the country you are selling in the settings of each delivery method you use.
This can be done from Settings > Shipping, choose the delivery method/s and from Shipping regions section, select the country you sell in, from the drop-down menu. If you cannot see it, add it from Geo Zones from the main menu.
Аlthough, we are glad to help you make the right tax settings for your online store, in terms of your actual taxes and obligations and to make sure that you charge your customers the correct sales tax rates and pay your taxes correctly, please always consult yourself with a local tax authority or tax accountant.