Taxes. Naxa AC-1
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Taxes
Chapter 51:
Managing Taxes
Magento provides a variety of options for defining taxes that can be accessed by selecting the Sales menu and then the Tax option. Tax classes are used to define “tax rules.” Tax rules are defined as a combination of a Product Class, a Customer Class and a Tax Zone and Rate, as described in this chapter.
Each type of customer can be assigned a customer class when you define them, and each product is assigned a tax class. Magento analyzes the shopping cart of each customer and calculates the appropriate tax according to the class of the customer, the class of the products in the shopping cart, and the region (as defined by the customer’s shipping address, billing address or shipping origin).
Magento also supports the calculation of Value-Added Tax (VAT) for business-tobusiness transactions in the European Union.
To learn more, see the Knowledge Base article: Recommended Tax Configurations and Best Practices .
Important! No guarantee is made regarding any information in this guide. Please contact an expert before making decisions about tax matters.
Tax Resource Permissions
Admin
can be set to restrict access to tax resources, based on the business “need to know.” To create an Admin
with access to tax settings, select both the Sales/Tax and System/Tax resources. If setting up a website for a region that differs from your default shipping point of origin, you must also allow access to the System/Shipping resources for the role, because the
determine the store tax rate used for catalog prices.
General Tax Configuration
Before setting up your taxes, make sure that you are familiar with the tax requirements of your locale. Then, complete the tax configuration as needed for your store.
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Process Overview:
Step 2: Complete the Calculation Settings
Step 3:Set Up the Default Tax Destination
Step 4: Complete the Display Settings
Step 5: Complete the Fixed Product Tax Settings
Step 1:
Set Up Tax Classes
1.
On the Admin menu, select System > Configuration .
2.
In the panel on the left, under Sales, select Tax .
3.
If you have multiple websites, set Current Configuration Scope to the website where the tax configuration applies.
4.
Click to expand the Tax Classes section.
Tax Classes
5.
Set Tax Class for Shipping to the appropriate class. The default classes are: l l l
Taxable Goods
Shipping
Tax Exempt
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Step 2:
Complete the Calculation Settings
1.
Click to expand the Calculation Settings section. Then, do the following:
Tax Calculation Settings a.
In the Tax Calculation Method Based On field, select whether the tax is based on the price of each unit, or on the “row total” (that is, the total for a line item in the order, accounting for any discounts).
b.
In the Tax Calculation Based On field, select whether the tax is calculated based on the customer’s shipping address, billing address, or your store’s shipping origin.
c.
In the Catalog Prices field, specify whether the catalog prices of items include tax or exclude tax.
d.
In the Shipping Prices field, select whether the shipping amounts include tax or exclude tax.
e.
In the Apply Customer Tax field, select whether tax is applied to the original or discounted price.
f.
In the Apply Discount on Prices field, select whether any discounts applied include the tax or exclude it.
g.
In the Apply Tax On field, select whether tax is applied to custom prices or to original prices.
h.
In the Enable Cross Border Trade field, select “Yes” to use consistent pricing across different tax rates, or select “No” to vary the price by tax rate.
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Important! If you enable cross-border trade your profit margin changes by tax rate. In other words, your profit is determined by the formula (Revenue -
CustomerVAT - CostOfGoodsSold) . To enable cross-border trade you must set prices to display including tax.
Step 3:
Set Up the Default Tax Destination
1.
Click to expand the Default Tax Destination Calculation section.
2.
Select the Default Country to be used for tax calculations.
3.
Select the Default State to be used for tax calculations.
4.
Select the Default Post Code to be used for tax calculations.
An asterisk can be used as a wildcard to represent all State and Post Code values.
Default Tax Calculation Settings
Step 4:
Complete the Price Display Settings
1.
Click to expand the Price Display Settings section Then, do the following:
Price Display Settings a.
Set Display Product Prices in Catalog to one of the following: l l l
Excluding Tax
Including Tax
Including and Excluding Tax
If you set the Display Product Prices field to “Including Tax,” the tax appears only if there is a tax rule that matches the tax origin, or if Magento detects that the customer address matches the tax rule. This can happen after a customer creates an account, logs in, or uses the Tax and Shipping estimation tool in the cart.
b.
Set Display Shipping Prices to one of the following:
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Excluding Tax
Including Tax
Including and Excluding Tax
2.
Click to expand the Shopping Cart Display Settings section.
For each section listed, chose how you want taxes and prices to be shown for products in a shopping cart, according to the requirements of your store and locale.
Shopping Cart Display Settings
3.
Click to expand the Orders, Invoices, Credit Memos Display Settings section. Then, select how prices and taxes are displayed in orders, invoices, and credit memos.
Orders, Invoices, Credit Memos Display Settings
Step 5:
Complete the Fixed Product Tax Settings
4.
Click to expand the Fixed Product Taxes section. Then, specify the behavior of fixed per product taxes, such as the European DEEE/WEEE (Waste Electrical and Electronic
Equipment) tax, according to the requirements for your store and products.
Fixed Product Taxes
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To assign a fixed tax to a product, create an attribute with the Catalog Input Type for
Store Owner set to “Fixed Product Tax.” Then, add the attribute to the attribute set for the product.
5.
When complete, click the Save Config button.
Tax Classes
Every product and customer is assigned to a tax class. Tax classes, in turn, are used to define tax rules. Tax rules are a combination of a customer tax class, product tax class, and tax rates. The two basic types of tax classes are: l l
Product Tax Classes
Product tax classes can be created and assigned according to the tax requirements of the product. For example, food might not be taxed (or might be taxed at a different rate). If your store charges an additional tax on shipping, you should designate a separate product tax class for shipping.
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Product Tax Classes
To define a product tax class:
1.
On the Admin menu, select Sales > Tax > Product Tax Class .
2.
In the upper-right corner, click the Add New button.
Product Tax Class Information
3.
Enter a Class Name for this tax class.
The new tax class now appears as a Tax Class option for product prices.
4.
When complete, click the Save Class button.
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Customer Tax Classes
You create customer tax classes and assign customers to them depending on the type of customer. For example, in some jurisdictions, wholesale transactions are not taxed but retail transactions are.
Customer Tax Classes
To define a customer tax class:
1.
On the Admin menu, select Sales > Tax > Customer Tax Classes .
2.
In the upper-right corner, click the Add New button.
Customer Tax Class Information
3.
Enter a Class Name for this tax class.
You can link a customer tax class to a customer group by editing the customer group.
You can then assign this customer group when creating or editing a customer.
4.
When complete, click the Save Class button.
Tax Zones & Rates
Tax rates generally apply to transactions that take place within a specific geographical area. The Tax Zones and Rates tool enables you to specify the tax rate for each geographical area for which you collect and remit taxes. Because you give each tax zone and rate specification a unique identifier, you can have multiple tax rates for a given geographic area (for example, for places that do not tax food or medicine but tax other products).
Store tax is calculated based on the store’s address. The actual customer tax for an order is calculated after the customer completes the order information. Magento then calculates the actual tax based upon the tax configuration of the store.
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Manage Tax Zones & Rates
To define tax zones and rates:
1.
On the Admin menu, select Sales > Tax > Manage Tax Zones & Rates .
2.
In the upper-right corner, click the Add New Tax Rate button.
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Tax Rate Information
3.
In the Tax Rate Information section, do the following: a.
In the Tax Identifier field, enter a unique name for this tax. Do not use spaces. This identifier is not shown in the store if the Tax Titles section is completed, as described below.
b.
Select the location of the Country and State . (Starting in EE 1.13.1, you can use the wildcard character * for State.) c.
Do one of the following: l l
If you want the ZIP or postal code represented as an individual code, set Zip/Post is Range , to “No.” Then, enter the Zip/Post Code .
If you want the ZIP or postal code represented as a range, set Zip/Post is Range to “Yes.” Then, enter the Range From and Range To values.
The wildcard character * can be used to represent all values. For example, 90* means all ZIP codes from 90000 through 90999.
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In the Rate Percent field, enter the percentage of tax.
4.
In the Tax Titles section, enter a name of this tax for each store view.
Tax Rules
Tax Titles
5.
When complete, click the Save Rate button.
Tax Rules
Tax management rules put all the taxation elements together: product tax classes, customer tax classes, and tax zones and rates. Each tax rule consists of a customer tax class, a product tax class, and a tax rate.
When numerous taxes must be defined, you can simplify the process by importing them from a spreadsheet. Select Sales > Tax > Import/Export Tax Rates.
Manage Tax Rules
To define tax rules:
1.
On the Admin menu, select Sales > Tax > Manage Tax Rules .
2.
In the upper-right corner, click the Add New Tax Rule button. Then, do the following:
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Tax Rule Information a.
Enter a Name for the rule.
b.
Select a Customer Tax Class . To select multiple options, hold the Ctrl key down and click each item.
c.
Select a Product Tax Class .
d.
Select the Tax Rate .
This rule applies the tax rate to customers in the selected customer tax class and to products in the selected product tax class.
e.
In the Priority field, enter a number to indicate the priority of this tax, when more than one tax applies. If two tax rules with the same priority apply, then the taxes are added together. If two taxes with different priority settings apply, then the taxes are compounded.
3.
In the Sort Order field, enter a number to indicate the order in which tax rules are displayed on the Manage Tax Rules page.
4.
If you want taxes to be based on the order subtotal, select the Calculate off Subtotal
Only checkbox.
5.
When complete, click the Save Rule button.
Field Descriptions
Field
Name
Customer Tax Class
Product Tax Class
Tax Rate
Description
Enter a name for this tax rule to make it easy to identify.
Select the customer tax class associated with this rule.
Select the product tax class associated with this rule.
Select the tax rate that applis to this rule.
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Field
Priority
Calculate off Subtotal
Only
Sort Order
Description
Enter a number to indicate the priority of this tax, when more than one tax applies. Lower numbers have higher priority. If two tax rules with the same priority apply then the taxes are added together. If two taxes with a different priority apply then the taxes are compounded. When taxes are compounded, the first priority tax is calculated on the subtotal amount, and then the second priority tax is calculated on the subtotal plus the first priority tax amount.
Select this checkbox for taxes to be calculated based on the subtotal of the order. This means that for this tax rule, tax applies only to the subtotal of the order.
Specify the order in which tax rules are displayed on the
Manage Tax Rules page. Lower numbers have higher sort order in the list.
Cross-Border Price Consistency
Cross-border trade (also referred to as price consistency) supports European Union (EU) and other merchants who want to maintain consistent prices for customers whose tax rates are different than the store tax rate.
Merchants operating across regions and geographies can show their customers a single price. Pricing is clean and uncluttered regardless of tax structures and rates that vary from country to country.
To use this feature, your store must display prices including tax. (Configure this setting in the Admin panel at System > Configuration > Sales > Tax > Calculation Settings,
Catalog Prices set to Including Tax.)
To enable cross-border price consistency:
1.
On the Admin menu, select System > Configuration .
2.
In the panel on the left, under Sales, select Tax .
3.
Click to expand the Calculation Settings section. To enable cross-border price consistency, set Enable Cross Border Trade to “Yes.”
Important! If you enable cross-border trade your profit margin changes by tax rate.
Profit is determined by the formula: (Revenue - CustomerVAT -
CostOfGoodsSold) .
4.
When complete, click the Save Config button.
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Enable Cross Border Trade Setting
Fixed Product Tax
Some tax jurisdictions have a fixed tax that must be added to certain types of products.
Magento lets you set up a fixed product tax (FPT) for use in your store's tax calculations. For example, in some countries FPT can be used to set up a Waste
Electrical and Electronic Equipment Directive (WEEE) tax, also known as "ecological tax" or "eco tax," that is collected on certain types of electronics to offset the cost of recycling. This tax is a fixed amount, rather than a percentage of the product price.
Your tax jurisdiction might also have rules about how you display the price of products to your customers, either with or without tax. Be sure you understand those rules so that you can set your FPT display options accordingly.
Fixed Product Tax Calculations
Fixed product taxes are applicable at an item level based on the product. In some jurisdictions this tax is subject to an additional % tax calculation.
FPT
Not Taxed
Display Setting and Associated Calculation
Excluding FPT
Including FPT
Treat FPT as a separate row in the cart and include the value of FPT in the appropriate tax calculations.
FPT is added to the base price of an item but is not included in tax- rule-based calculations.
Excluding FPT, FPT
Description, Final
Price
Item prices are shown without FPT, FPT amount, and with FPT included. FPT is not included in tax-rule-based calculations.
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FPT
Taxed
Fixed Product Tax
Display Setting and Associated Calculation
Excluding FPT
Including FPT
Treat FPT as a separate row in the cart and include the value of FPT in the appropriate tax calculations.
FPT is included in the price of an item, and no change to tax calculations is required.
Excluding FPT, FPT
Description, Final
Price
Item prices are shown without FPT, FPT amount, and with FPT included. FPT is included in tax-rule-based calculations.
Fixed Product Tax Setup
The following instructions show how to set up a fixed product tax for your store. An “eco tax” is an example of how you might used FPT. After setting the scope for the tax and the countries and states where the tax applies, and depending on the options you choose, the input fields can change to accommodate the local requirements.
Process Overview:
Step 2: Create an FPT Attribute
Step 3: Add the FPT to an Attribute Set
Step 4: Apply the FPT to Products
Step 1:
Enable the FPT Tax
1.
On the Admin menu, select System > Configuration .
2.
In the panel on the left, under Sales, select Tax .
3.
Click to expand the Fixed Product Taxes section. Then, complete the fields as needed, using the
section at the end of this section for reference.
Fixed Product Tax
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4.
When complete, click the Save Config button.
Step 2:
Create an FPT Attribute
1.
On the Admin menu, select Catalog > Attributes > Manage Attributes .
2.
In the upper-right corner, click the Add New Attribute button. Then, do the following:
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Fixed Product Tax a.
In the Attribute Code field, specify a unique identifier for this attribute. Do not use spaces or special characters. However, you can use hyphens or underscores. The maximum length is 30 characters.
b.
Set Scope to indicate where in your Magento installation the attribute will be available.
c.
Set Catalog Input Type for Store Owner to “Fixed Product Tax.” d.
Set Apply To to one of the following:
All Product Types Makes the FPT attribute available for all product types.
Selected Product Types If you select this option, select each product type in the list that will use the attribute.
3.
In the panel on the left, select Manage Label / Options . Then, enter a label to identify the field. If you enter one label for the Admin, it will be used for the other views.
Manage Label / Options
4.
When complete, click the Save Attribute button.
To learn more, see:
.
Step 3:
Add the FPT Attribute to an Attribute Set
1.
On the Admin menu, select Catalog > Attributes > Manage Attribute Sets .
2.
Open the attribute set that needs the FPT attribute.
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3.
Drag the FPT attribute from the list of Unassigned Attributes on the right to the Groups list. The group folders correspond to sections in the Product Information panel. You can place the attribute wherever you want it to appear.
Edit Attribute Set
4.
When complete, click the Save Attribute Set button.
To learn more, see:
Step 4:
Apply the FPT to Products
1.
On the Admin menu, select Catalog > Manage Products .
2.
Find the product that needs the FPT and open it in edit mode.
3.
In the product information, find the FPT field that you added to the attribute set. Then, do the following:
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4.
Click the Add Tax button. Then, do the following: a.
Select the Country/State where the FPT applies.
b.
Enter the amount in the Tax field.
c.
To add more FPT taxes, click the Add Tax button and repeat the process.
5.
When complete, click the Save button.
Field Descriptions
Field
Enable FPT
Website
Display Prices in Product
Lists
Website
Display Price On Product view Page
Website
Display Prices in Sales
Modules
Display Prices in Emails Website
Apply Discounts to FPT Website
FPT Tax Configuration
Website
Website
Description
Determines if FPT is available. Options include:
Yes / No
Controls the display of FPT in product lists.
Options include:
Including FPT only
Including FPT and FPT description
Excluding FPT, FPT description, final price
Excluding FPT
Controls the display of FPT on the product page.
Options include:
Including FPT only
Including FPT and FPT description
Excluding FPT, FPT description, final price
Excluding FPT
Controls the display of FPT in the shopping cart and during checkout. Options include:
Including FPT only
Including FPT and FPT description
Excluding FPT, FPT description, final price
Excluding FPT
Controls the display of FPT in email. Options include:
Including FPT only
Including FPT and FPT description
Excluding FPT, FPT description, final price
Excluding FPT
Determines if discounts can be applied to the
FPT amount. Options include: Yes / No
(Available in EE 1.13.1 and later) Determines how
FPT tax is calculated. Options include:
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Field
Include FPT in Subtotal Website
Description
Not Taxed
Taxed
Select this option if your taxing jurisdiction does not tax FPT.
(For example,California.)
Select this option if your taxing jurisdiction does tax FPT. (For example, Canada.)
Loaded and
Displayed with Tax
Click this option if FPT is added to the order total before applying tax. (For example, EU countries.)
Determines if FPT is included in the shopping cart subtotal. Options include:
Yes
No
Includes FPT in the shopping cart subtotal.
FPT is not included in the subtotal, and is placed after the subtotal in the shopping cart.
Be Careful Disclosing FPT Prices in Email
The manner in which you set the Display Prices in Sales Modules and Display Prices in
Email options can affect customer confidence in their orders. For example, if you choose to display Order Review prices without showing FPT, customers who buy items with associated FPT will see a total that includes the FPT tax amount, but they will not see an itemized entry for the amount.
This might cause abandoned carts if your customers see an order total that does not match what they expect, based on an itemized list of products in the order.
Compound Taxes
For compound taxes, the total cost of a product or service is taxed at one rate, and then the total of that amount, including the first tax amount, is taxed a second time.
Compound tax is also known as stacked tax.
For example, in a regular tax calculation involving two tax rules, each rule is applied separately to the product subtotal, and the taxes are added together to calculate the total tax, which is then added to the product subtotal to calculate the grand total:
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Regular Two-Tax Calculation
$50.00
+ $50.00
$100.00
Product Price
Product Price
Subtotal
$5.00
+ $10.00
$15.00
Subtotal x 1st tax rate 5%
Subtotal x 2nd tax rate 20%
Total Taxes
$100.00
+ $15.00
$115.00
Subtotal
Total Taxes
Grand Total
With compound taxes, the first tax is added to the product subtotal, and the second tax is applied to that total:
Compound Tax Calculation
$50.00
+ $50.00
$100.00
Product Price
Product Price
Subtotal
$5.00
+ $10.50
$15.50
Subtotal x 1st tax rate 5%
[Subtotal + (Subtotal x 1st rate)] x 2nd tax rate: $105 x 10%
Total Taxes
$100.00
+ $15.50
$115.50
Subtotal
Total Taxes
Grand Total
Setting Up Compound Taxes
Price rules with different priorities are used to set up a compound tax. If two tax rules with the same priority apply then the taxes are added together. If two taxes with a different priority apply then the taxes are compounded. When taxes are compounded, the first priority tax is calculated on the subtotal amount, and then the second priority tax is calculated on the subtotal plus the first priority tax amount. Lower numbers have higher priority.
Important: In order for compound taxes to work correctly do not select the Calculate off subtotal only check box when you set up your tax rules that apply to compound taxes.
This check box overrides the compounding calculation and cannot be used in conjunction with compound taxes.
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To set up compound taxes:
1.
Complete the setup of all tax rates to be used in the compound tax rule. See:
2.
Set up the first tax rule for compounding. For the first tax rule, be sure that you set a higher priority than you will set for the next tax rule, which will be compounded on top of this first tax rule. Lower numbers are used for higher priority. Use 0 for the highest priority. See:
.
3.
Set up the second tax rule for compounding. For the second rule, be sure that you set a lower priority (use a higher number) than you set for the first tax rule.
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Notes
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Magento Community Edition: User Guide
Chapter 52:
Value Added Tax (VAT)
Some countries charge a value added tax, or VAT, on goods and services. There can be different VAT rates depending on which stage you as a merchant are at in the manufacture 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.
This section provides a sample procedure for setting up a 20% VAT in the U.K. for sales to retail customers. For other tax rates and countries, follow the general procedure but enter specific information that corresponds to your country, VAT rate, customer types, and so on.
Before proceeding, make sure to find out which rules and regulations apply to VAT in your area.
In certain business-to-business transactions, VAT is not assessed. Magento can validate a customer’s VAT ID to ensure that VAT is assessed (or not assessed) properly. To learn more, see:
Process Overview:
Step 1: Set Up Customer Tax Classes
Step 2: Set Up Product Tax Classes
Step 3: Set Up Tax Zones and Rates
Step 5: Apply Tax Classes to Products
Step 1:
Set Up Customer Tax Classes
1.
On the Admin menu, select Sales > Tax > Customer Tax Classes .
2.
Ensure that there is a customer tax class that is appropriate to use with the VAT.
For this example, ensure that there is a customer tax class named Retail Customer.
If Retail Customer does not exist, click the Add New button and add it.
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Step 2:
Set Up Product Tax Classes
1.
On the Admin menu, select Sales > Tax > Product Tax Classes .
2.
Click the Add New button and create three new classes: l l l
VAT Standard
VAT Reduced
VAT Zero
3.
Click the Save Class button for each new class that you add.
Step 3:
Set Up Tax Zones and Rates
1.
On the Admin menu, select Sales > Tax > Manage Tax Zones & Rates .
For this example you can remove the U.S. tax rates, or leave them as they are.
2.
Click the Add New Tax Rate button. Add new rates as follows:
New Tax Rate
VAT Standard
Settings
Tax Identifier: VAT Standard
Country and State:
Rate Percent:
United Kingdom
20.00
VAT Reduced
Tax Identifier:
Country and State:
Rate Percent:
VAT Reduced
United Kingdom
5.00
3.
Click the Save Rate button for each rate.
Step 4:
Set Up Tax Rules
A tax rule is a combination of a customer tax class, a product tax class, and a tax rate.
1.
On the Admin menu, select Sales > Tax > Manage Tax Rules .
2.
Add new tax rules as follows:
New Tax Rule
VAT Standard
Settings
Name: VAT Standard
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New Tax Rule Settings
Customer Tax Class:
Product Tax Class:
Tax Rate:
VAT Reduced
Name:
Customer Tax Class:
Product Tax Class:
Tax Rate:
3.
Click the Save Rule button for each rate.
Retail Customer
VAT Standard
VAT Standard Rate
VAT Reduced
Retail Customer
VAT Reduced
VAT Reduced Rate
Step 5:
Apply Tax Classes to Products
1.
On the Admin menu, select Catalog > Manage Products .
2.
Open a product from your catalog in edit mode.
3.
On the General page, find the Tax Class field. Then, select the VAT Class that applies to the product.
4.
When complete, click the Save button.
VAT ID Validation
All editions of Magento include value-added tax (VAT) ID validation. VAT ID Validation is intended for B2B merchants from the European Union (EU), where VAT is charged if a merchant and a customer are in the same country, and VAT is not charged if a merchant and a customer are in different countries within EU and both parties are EU-registered business entities. If enabled, you can override it for a certain customer by selecting the correspondent checkbox on the Customer Information page.
VAT identification number (VAT ID) Validation enables store administrators to create more than one default customer group, which will be automatically assigned to each customer during account creation, address creation or update, and checkout according to the customer’s VAT ID, and the customer’s and merchant’s location countries. This feature enables merchants to create different tax rules for intra-country (domestic) and intra-EU sales, and to apply the corresponding VAT amount automatically.
VAT-related tax rules do not influence other tax rules and do not prevent applying other tax rules where applicable. Only one tax rule can be applied at a given time.
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Magento performs VAT ID validation using the web-services of the European
Commission server.
Setting Up VAT ID Validation
Process Overview:
Step 1: Create the VAT-Related Customer Groups
Step 2: Create the VAT-Related Classes, Rates and Rules
Step 3: Enable and Configure VAT ID Validation
Step 4: Set your VAT ID and Location Country
Step 5: Verify the List of EU Member Countries
Step 1:
Create the VAT-Related Customer Groups
VAT ID Validation automatically assigns one of the four default customer groups to customers according to VAT ID validation results: l l l l
Domestic
Intra-EU
Invalid VAT ID
Validation error.
You can create new customer groups to be used in the VAT ID Validation functionality or use existing groups, if they comply with your business logic. Customer groups are created under Customers > Customer Groups.
When configuring the VAT ID Validation functionality, you will need to assign each of the created customer groups as a default for customers with appropriate VAT ID validation results. For details see the Enabling and Configuring the VAT ID Validation
Functionality section further.
Step 2:
Create the VAT-Related Classes, Rates, and Rules
The VAT ID Validation functionality was implemented to facilitate the VAT applying for
EU B2B merchants. In Magento, taxes are applied using the tax rules mechanism. Each tax rule is defined be three entities: l l l
Customer Tax Classes
Product Tax Classes
Tax Rates
To use the VAT ID Validation functionality effectively, you need to create the appropriate tax rules.
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All tax rule related entities, including tax rules, tax rates, product tax classes and customer tax classes, are managed under Sales > Tax.
Tax classes are assigned to customer groups under Customers > Customer Groups >
%customer group%.
Important! According to the EU taxation policy , the supply of services between businesses (B2B services) is in principle taxed at the customer’s place of establishment.
If you sell downloadable or virtual products, which do not require shipping, the VAT rate of a customer’s location country should be applied for both, intra-union and domestic sales. This means that you additionally must create individual tax rules for a product tax class that corresponds to the downloadable and virtual product types.
Minimal Tax Rules Required for VAT ID Validation
Tax Rule #1
Customer Tax Class n
A class for domestic customers
Product Tax Class n
A class for customers with invalid VAT ID n
A class for customers, for whom VAT ID validation failed
A class for products of all types, except bundle and virtual.
Tax Rate VAT rate of the merchant’s country.
Tax Rule #2
Customer Tax Class
Product Tax Class
Tax Rate
A class for intra-union customers.
A class for products of all types, except downloadable and virtual.
VAT rates for all EU countries, except merchant’s country. Currently this rate is 0%.
Tax Rule #3
(Required only if you sell bundle or virtual products.)
Customer Tax Class n
A class for domestic customers n
A class for customers with invalid VAT ID n
A class for customers, for whom VAT ID validation failed
Product Tax Class
Tax Rate
A class for downloadable and virtual products.
VAT rate of the merchant’s country.
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Tax Rule #4
(Required only if you sell bundle or virtual products.)
Customer Tax Class A class for intra-union customers.
Product Tax Class
Tax Rate
A class for downloadable and virtual products.
VAT rates for all EU countries, except merchant’s country. Currently this rate is 0%.
It is recommended that you apply the merchant’s VAT rate for customers with invalid
VAT IDs, and those for whom validation fails. You can create other tax rules and apply other tax rates according to your business logic.
Step 3:
Enable and Configure VAT ID Validation
1.
On the Admin menu, select System > Configuration .
2.
In the panel on the left, under Customers, select Customer Configuration .
3.
Set Current Configuration Scope to “Default Config,” or the applicable store view.
4.
Click to expand the Create New Account Options section.
5.
Set Enable Automatic Assignment to Customer Group to “Yes.” Then complete the fields as described below.
6.
When complete, click the Save Config button.
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Field Descriptions
Field
Description
Enable Automatic Assignment to Customer Group
Store View Determines if customers are automatically assigned to the default customer group. To show VAT number in the store, set Show VAT
Number in the storefront, select “Yes.” Options include:
Yes The system does not automatically validate customer VAT
IDs nor does it change customer groups.
No The system behavior is as usual, and the default customer group can be set in the Default
Group field.
Tax Calculation Based
On
Store View Choose whether VAT calculation will be based on customer's shipping or billing address. If the customer does not have a shipping address
(that is, the customer has only now registered and the system does not yet take into account the customer's shipping address), the Default
Tax Destination Calculation address is used for tax calculations that appear to the customer.
Options include:
Billing
Address
Calculates VAT based on the customer billing address.
Shipping
Address
Calculates VAT based on the cusotmer shipping address.
Important! If the Tax Calculation Based On shipping address, and a customer purchases only downloadable or virtual products, Magento will use the billing address for VAT calculation.
Default Group
Group for Valid VAT ID -
Domestic
Group for Valid VAT ID -
Intra-Union
Store View Identifies the default customer group.
Store View Determines the customer group that is automatically assigned to customers from your country who have a valid VAT ID.
Store View Determines the customer group that is automatically assigned to customers from other
EU countries who have a valid VAT ID.
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Field
Description
Group for Invalid VAT ID Store View Determines the customer group that is automatically assigned to customers who have an invalid VAT ID.
Validation Error Group Store View Determines the customer group that is automatically assigned to customers who failed VAT
ID validation.
Validate on Each Transaction
Store View Choose whether VAT ID validation will be performed each time during order creation even if a previously saved customer address with validated VAT ID is used. The option applies to onepage checkout in the storefront, only. If a new customer address is used (including guest checkout or if a customer has no address assigned to their account), then the validation is performed irrespective of this setting. During order creation in the Admin, no automatic validations are performed. Options include: Yes / No
Default Value for Disable
Automatic Group
Changes Based on
VAT ID
Global (Available only if Current Configuration Scope is set to “Default Group.”) Choose whether the automatic change of customer group based on
VAT ID will be enabled or disabled by default.
The setting can be overridden on the product level. The setting influences the system behavior in the following situations: n
The VAT ID of the customer’s default address or the whole default address changes.
n
Customer group change was emulated during the checkout for a registered customer who had no previously saved address or for a customer, who registered during the checkout.
Show VAT Number on Website
If the automatic group change is enabled, then in the first case the customer group changes automatically, and in the second case the temporarily emulated customer group is assigned to customer.
If the automatic group change is disabled, the customer group that is assigned never changes, unless an administrator changes it manually.
Determines if the VAT number is visible to cus-
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Field
Frontend
Default Email Domain
Default Welcome Email
Email Sender
Description tomers in the store. Options include: Yes / No
Store View Identifies the default email domain.
Store View Identifies the email template used for the default Welcome email.
Store View Identifies the store identity that appears as the sender of the Welcome email.
Require Emails Confirmation
Website Determines if email messages require confirmation. Options include: Yes / No
Confirmation Link Email Store View Identifies the email template used for the confirmation email.
Welcome Email
Generate Human-
Friendly Customer ID
Store View Identifies the template used for the Welcome email that is sent after the account is confirmed.
Global Choose whether the field for entering and storing the VAT ID number will be visible in the frontend. Options include: Yes / No
Step 4:
Set Your VAT ID and Location Country
1.
On the Admin menu, select System > Configuration .
2.
In the panel on the left, under General, select General .
3.
Set Current Configuration Scope to the applicable store view.
4.
Click to expand the Store Information section. Then, do the following:
Store Information
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Select your Country .
b.
Enter your VAT Number . Then, click the Validate VAT Number button. The result appears immediately.
If your VAT number is valid, then apart from validation result for each customer’s
VAT ID validation, the validation server will send to Magento the following additional information: VAT request identifier and VAT request date. If a customer’s VAT validation is performed during checkout, then the VAT request identifier and VAT request date are saved in the Comments History section of the Order View page under Sales > Orders > (select appropriate order).
5.
When complete, click the Save Config button.
Step 5:
Verify the List of EU Member Countries
1.
On the Admin menu, select System > Configuration .
2.
Set Current Configuration Scope to the applicable store view.
3.
Click to expand the Countries Options section.
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Countries Options
4.
In the European Union Countries list, verify that each member country of the EU is selected.
5.
When complete, click the Save Config button.
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VAT Validation Customer Workflow
During Registration
If VAT ID Validation is enabled, after registration each customer is proposed to enter the
VAT ID number. However only those who are registered VAT customers are expected to fill this field.
After a customer specifies the VAT number and other address fields, and chooses to save, the system saves the address and sends the VAT ID validation request to the European
Commission server. According to the results of the validation, one of the default groups is assigned to a customer. This group can be changed if a customer or an administrator changes the VAT ID of the default address or changes the whole default address. And the group can be temporarily changed (group change will be emulated) in some cases during one-page checkout.
During Checkout
The system behavior concerned with the VAT ID validation and the customer group change during the checkout depends on how the Validate on Each Transaction and the
Disable Automatic Group Change settings are configured. This section describes the implementation of the VAT ID Validation functionality for the checkout on the frontend.
In case a customer uses Google Express Checkout, PayPal Express Checkout or another external checkout method, when the checkout is performed completely on the side of the external payment gateway, the Validate on Each Transaction setting cannot be applied.
Thus the customer group cannot change during checkout. The following inllustration shows the flow of VAT ID validation and customer group change during one-page checkout.
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One-Page Checkout with VAT ID Validation
Managing VAT Validation
VAT Number Customer Address Attribute
Customer VAT ID value is stored in the vat_id customer address attribute. The default label of this attribute is VAT number. Customer address attributes are managed under
Customers > Attributes > Manage Customer Address Attributes.
The VAT number field is always present in all shipping and billing customer addresses in the backend. It is not mandatory. Displaying the field in the frontend is configured in the Show VAT Number in Frontend field under System > Configuration > Customers >
Customer Configuration > Create New Account Options.
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For customers not from the EU countries, consider storing the VAT number (if any), in the existing Tax/VAT Number customer attribute to avoid any possibility of customer group change (whether persistent or emulation during checkout). It is recommended that you rename the Tax/VAT Number customer attribute to avoid confusion with the new VAT Number customer address attribute that is used for the VAT ID Validation functionality.
Disable Automatic Customer Group Change
When the VAT ID Validation functionality is enabled, the group of a customer can only be changed manually in the Admin Panel, no automatic changes of customer group can take place.
When the VAT ID Validation functionality is enabled, the system will automatically, permanently change a customer group in the following situations: l l
The VAT ID of the customer’s default address or the whole default address changes.
The customer group change was emulated during the checkout for a registered customer who had no previously saved address, or a customer who registered during the checkout.
The automatic customer group change can be disabled by selecting the Disable automatic group change checkbox on the customer’s page under Customers > Manage
Customers > %customer% > Account Information.
Disabling Automatic Group Change on Customer Level
Important! The setting does not influence the emulation of the customer group change during checkout.
The default value of the Disable automatic group change checkbox is set in the Default
Value for Disable Automatic Group Changes Based on VAT ID field under System >
Configuration > CUSTOMERS > Customer Configuration > Create New Account
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Options. The configuration setting is made on the global level. The default value applies to new customers and to customers whose records are available in the system when the
VAT ID Validation functionality is enabled for the first time.
VAT ID Validation in Customer Accounts
When an administrator adds a new default address with a VAT ID to the account of a new or existing customer or changes the VAT ID of the existing default address, the system validates the VAT ID and assigns the appropriate customer group to the customer. The validation is performed after the Save or Save and Continue button is clicked.
The system behavior is as described when the VAT ID Validation functionality is enabled and configured.
If you want to disable the automatic change of a customer group, select the Disable automatic group change check box on the Account Information tab of the Customer
Information page.
VAT ID Validation When Creating an Order
During order creation in the Admin Panel no VAT ID validation is performed automatically. To validate the VAT ID of the customer address, an administrator needs to click the Validate VAT Number button in the Billing Address or Shipping Address section of the Create New Order page.
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Validating Customer VAT ID at Order Creation
After the validation, the administrator receives a notification about the validation results in the form of a pop-up message.
A customer group, which should be assigned to a customer according to the validation results, can differ from the customer group that is currently assigned to the customer. In this case the system displays a dialog box suggesting that the administrator confirm or
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VAT rate is applied (if the corresponding tax rule is configured in the system). The actual customer group of a customer is not changed.
If a new customer account is added when an order is created, and an administrator confirms the customer group that corresponds to the VAT ID validation results, after the order is created, the customer account is saved in the system, and the customer group that was used to create the order is assigned to the customer.
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Notes
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