How to Charge VAT to your Buyers in the European Union

May 19,2017 9 min read

With the changes in the VAT regulations, our VAT system has changed slightly. All merchants are technically suppose to charge VAT to E.U. buyers based on the buyer's location. Luckily this is not especially hard to set up.

First, you need to make sure VAT is enabled in your settings. Go to Seller Admin > Sales Tax/VAT Settings.

Click Submit to save the setting. After that you will need to setup your products to charge Sales Tax/VAT. Go to Seller Admin > View/Edit/Delete Products, select a product from the drop down menu and click Edit. On the following page add a check mark to the box for the "Sales Tax, VAT" option.

Then click Next until you can Submit the changes. (Make sure to do this for each product.)

Something to keep in mind--our system will not add a tax amount, instead, it will treat the item prices as gross amount including VAT. So, you may also wish to raise your prices to include a VAT overhead.

Our transaction log also now has new fields to make figuring the amount to remit easier. Here are the new transaction log fields:

  • Payment Acct Country: Billing address country or PayPal account residence country;

  • GeoIP: Country where the buyer's connection IP is located;

  • Digitals Country: Place of supply for digital items - result of two-way country match comparing GeoIP, Payment Acct Country, and either Shipping country (if supplied) or country declared in cart (this will show "??" if no match was found);

  • Digitals VAT: Order subtotal of VAT calculated for digital items;

  • Tangibles Country: Place of supply for non-digital items - will match either Shipping destination for non-EU sellers or EU business location selected in Sales Tax/VAT Settings at the time we processed the order);

  • Tangibles VAT: Order subtotal of VAT calculated for non-digital items;

  • Item VAT Rate: Applicable rate for the item;

  • Item VAT Country: Place of supply for the item (will match Digitals or Tangibles Country);

  • Item VAT Type: ebook or standard.

If you are unsure if you should charge VAT, please bear in mind that E.U. tax regulations do require VAT to be charged by non-E.U. merchants selling to buyers in the E.U.