An Insight Into VAT Validation In Magento 2

The required tax for B2B transactions that take place within the European Union (EU) is calculated by VAT ID Validation automatically. Magento performs VAT ID validation using the web services of the European Commission server.

VAT-related tax rules do not affect other tax rules and do not prevent the application of different tax rules. Only one tax rule can be applied at a given time.

If the supplier and customer are located in the same EU country, Magento can be set up to charge a VAT. If they are located in different EU countries, and both parties are EU-registered business entities, VAT is not charged.

More than one default customer group can be created by store administrators and automatically assigned to the customer during account creation, address creation or update, and checkout.that different tax rules are used for domestic and intra-EU sales.

If your product type is downloadable, that’s mean they do not require shipping. The VAT rate should be applied to both intra-union and domestic sales. You must generate additional individual tax rules for product tax classes that relate to the virtual products.

Customer Registration Workflow

Each customer is proposed to enter the VAT ID number after registration. However, only those who are registered VAT customers have to fill this field.

After the customer submits the VAT number and other address fields to the system, it sends the VAT ID validation request to the European Commission server. One of the default groups is assigned to a customer, following to the validation result. If store administrator or customer edits the VAT ID of the default address or the complete default address, this group can be changed. In some cases during one-page checkout, the group can be temporarily changed (group change will be emulated).

By clicking the checkbox on the Customer Information page, you can override VAT ID Validation for individual customers.

Checkout Workflow

The VAT will request identifier and VAT request date are saved in the Comments History section of the order if a VAT validation is performed 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 usage of the VAT ID Validation functionality for the checkout on the frontend.

If a customer uses Google Express Checkout, PayPal Express Checkout or another foreign checkout method, when the checkout is performed completely on the side of the foreign payment gateway, the Validate on Each Transaction setting cannot be applied. Thus the customer group cannot change during checkout.

VAT Validation In Magento 2
VAT Validation Checkout Workflow

How To Configure VAT In Magento 2

In this article, we will describe a tutorial on how to set up a 20% VAT in the U.K. for sales to retail customers. For other tax rates and countries, you can make the same progress with specific information that required in your state, VAT rate, customer types, and so on. Remember to find out which rules and regulations apply to VAT in your area.

VAT is not assessed in certain business-to-business transactions. A customer’s VAT ID can be validated to ensure that VAT is assessed (or not assessed) correctly. For further information, please visit VAT ID Validation.

Step 1: Set Up Customer Tax Classes

On the admin sidebar click Store > Tax Zones and Rates.

Make sure that there is a customer tax class that is suitable to use with the VAT.

Step 2: Set Up Product Tax Classes

On the admin sidebar click Sales > Tax > Product Tax Classes.

Click the Add New button and create three new classes:

VAT Standard

VAT Reduced

VAT Zero

Click Saved class button

Step 3: Set Up Tax Zones and Rates

On the admin sidebar, click Sales > Tax > Manage Tax Zones & Rates.

Click the Add New Tax Rate button. Add new rates and save them:

NEW TAX RATE SETTINGS
VAT Standard
Tax Identifier: VAT Standard
Country and State: United Kingdom
Rate Percent: 20.00
VAT Reduced
Tax Identifier: VAT Reduced
Country and State: United Kingdom
Rate Percent: 5.00

Step 4: Set Up Tax Rules

On the admin sidebar click Sales > Tax > Manage Tax Rules.

Add new tax rule and save rule:

NEW TAX RULE SETTINGS
VAT Standard
Name: VAT Standard
Customer Tax Class: Retail Customer
Product Tax Class: VAT Standard
Tax Rate: VAT Standard Rate
VAT Reduced
Name: VAT Reduced
Customer Tax Class: Retail Customer
Product Tax Class: VAT Reduced
Tax Rate: VAT Reduced Rate

Step 5: Apply Tax Classes to Products

On the Admin sidebar, click Catalog > Manage Products.

From your catalog, open a product in edit mode. On the General page, find the Tax Class field. Then, select the VAT Class that applies to the product. Save after completed.

 

An Insight Into Value Added Tax In Magento 2 Store

Many countries operate the charging of Value Added Tax (VAT) on goods and services. VAT rates can be different depending on which stage you as a merchant is at in distribution or the manufacture of the products, materials, or services that you sell to your customers. Sometimes more than one VAT rate is applied in your store for tax calculation purposes.

If both the supplier and customer are located in the same EU country, Magento can be set up to charge a value-added tax. If they are located in different EU countries, no VAT is charged.

However, for the sale of downloadable products, the VAT depends on the shipping destination rather than the merchant location. For further information, please visit: An Insight Into EU Place Of Supply For Digital Products on Magento 2.

To address different scenarios, Magento uses the following fields and configuration settings.

Summary of VAT Fields

SECTION DESCRIPTION
MERCHANT INFORMATION
Follow these steps: Stores > Configuration > General > General > Store Information
Store Information
VAT Number The VAT number that is assigned to the merchant.
 Validate VAT Number VAT validation is a progress to confirm that the VAT Number matches the corresponding record in the European Commission database.
CUSTOMER INFORMATION
Follow these steps: Customers > All Customers > Edit
Account Information
Tax/VAT Number If applicable, the tax number or VAT number that is assigned to the customer.
Addresses
VAT Number If applicable, the VAT number that is related to a specific billing or shipping address of the customer. The amount of the VAT is based on shipping destination for the sale of digital goods within the EU.
Follow these step: Configure > Customers > Customer Configuration
Create New Account Options
Show VAT Number on Storefront Decides if the customer VAT Number field is added to the Address Book that is available in the customer account.
Default Value for Disable Automatic Group Changes Based on VAT ID VAT ID is an internal identifier for the VAT Number of the customer when used in VAT Validation. In progress of VAT Validation, Magento confirms that the number matches the European Commission database. Customers can be assigned to one of the four default customer groups automatically based on the validation results.

How To Import And Export Tax Rates In Magento 2

If your business is conducted in several places and ship a large quantity of product, downloading tax rates by ZIP code is more effective than enter the rates manually. Store administrators can import the rate into Magento. In this article, we will describe a tutorial on how to import a set of tax rates.

Step 1: Export the Magento Tax Rate Data

On the admin sidebar click System. Under Data Transfer click Import/Export Tax Rates. Click Export Tax Rates. The download file stays in the lower-left corner of the browser.

Save the file and open it in a spreadsheet. The exported Magento tax rate data includes these columns:

  • Code
  • Country
  • State
  • Zip/Post Code
  • Rate
  • Range From
  • Range To
  • A column for each store view
Import And Export Tax Rates In Magento 2
Export Tax Rate Data

Open the new tax rate data in a second instance of the spreadsheet, so you can see both, side by side. In the new tax rate data, observe any additional tax rate data that you might need to set up in your store before the data is imported. For example, the tax rate data import file includes:

TaxRegionName

CombinedRate

StateRate

CountyRate

CityRate

SpecialRate

If you need to import additional tax zones and rates, you must first determine them from the admin panel and update the tax rules. After that, export the data and open the file so it can be used for reference.

Step 2: Prepare the Import Data

Now you have 2 spreadsheets side by side. One with the Magento export file structure, and the other with the new tax rate data that you want to import.

  1. To create a workplace in the spreadsheet with the new data, insert several blank columns at the far left. Then, use cut/paste function to rearrange the columns so they match the order of the Magento export data.
  2. Rename the column headers to match the Magento export data.
  3. Delete any null columns. Otherwise, the import file’s structure should similar to the original Magento export data.
  4. Remember that the tax rate columns contain only numeric data. Any text found in a tax rate column will prevent the data from being imported.
  5. Save the prepared data in a .CSV format. After saved, verify that a comma is used a Field delimiter, and double quotes as the Text delimiter. Then, click OK.

Step 3: Import the Tax Rates

On the admin sidebar click System. Under Data Transfer click Import/Export Tax Rates. Click Browse and select the .CSV file that you prepared to import. Click Import Tax Rates. When the process is complete, the notification “The tax rate has been imported” displays. If you receive an error message, resolve the problem in the data and try again.

On the admin sidebar click Stores. Under Taxes click Tax Zones and Rates. The imported rates display in the list. Use the page controls to view the new tax rates.

Import and export tax rates in magento 2
Imported Tax Rates

To ensure that the new tax rates work correctly, make some test transactions in your store with customers from different ZIP codes.

How To Use The Tax Zones And Rates Tool In Magento 2

Tax Zones and Rates tools in Magento 2 backend allows store administrators to indicate the tax rate for each geographical area from which they collect and transfer taxes. Because every tax zone and rate has a unique identifier, store administrators can have multiple tax rates for several specific places (such as places that do not tax food or emergency medicine, but do tax other items). In this article, we will describe a tutorial on how to use the Tax Zones and Rates tool in Magento 2 admin panel.

Tax zones and rates tool in magento 2
Tax Zones and Rates

To define a new tax rate, you can follow these steps:

On the admin sidebar click Stores. Under Taxes click Tax Zones and Rates. In the upper-right corner, click Add New Tax Rate and input the Tax Identifier.

Input the code in the Zip/Post Code field to apply the tax rate to a single ZIP or postal code.

The asterisk wildcard (*) can be used to match up to ten characters in the code. For example, 90* represents all ZIP codes from 90000 through 90999.

To apply the tax rate to a range of ZIP or postal codes, follow these steps:

  • Tick the checkbox next to the Zip/Post is Range. Then in the Range From and Range To fields, input the first and last ZIP or postal code to determine the range.
Tax zones and rates tool in magento 2
ZIP/Post is Range
  • Choose the State and Country where the tax applies.
  • Input the Rate Percent that is used for the tax rate calculation.

Click Save Rate after completed.

Tax zones and rates tool in magento 2
New Tax Rate

To edit an existing tax rate, follow these steps:

On the admin sidebar click Stores. Under Taxes click Tax Zones and Rates.

Find the tax rate in the Tax Zones and Rates grid, and open the record in edit mode. If there are many rates on the list, find the rate you need using the filter controls.

Make any changes to the Tax Rate Information and update the Tax Titles as needed.

Click Save Rate after completed.

Above is an article on how to use tax zones and rates tool in Magento 2 backend. We hope that you can define or edit tax rate using information from this article. In the next article, we will describe Import/Export Tax Rates in Magento 2. Like, share and subscribe Magestandard for more Magento 2 tutorial article