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. |
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