Setting up European VAT Rules for Selling Physical Goods with J2Commerce
Setting up the European VAT system in J2Commerce is relatively easy. We have created a plugin that automatically validates the VAT number and helps you apply the rules. For detailed information on taxes, please consult an expert. J2Commerce is not held responsible VAT / Tax changes.
This guide walks you through the tax configuration for EU.
The VAT rules are:
- Home country’s residents & businesses are charged VAT (Home country’s rate. That is, the rate defined by you in the Tax Profile.
- EU residents & businesses with no valid VAT number will be charged VAT (Home country’s rate, that is, the rate defined by you in the Tax Profile).
- EU (Non Home country) and with a valid VAT number are charged 0% VAT.
- Non-EU residents & businesses are charged 0% VAT.
Implementing VAT rules in J2Commerce
We have created a VAT plugin that helps you implement the VAT rules automatically. Download and install the plugin from here:http://j2store.org/extensions/general-plugins.html
Let us assume that your company is located in : United Kingdom, Bristol, and your home country (local ) VAT is 21 %.
Store Profile
Go to Joomla admin – J2Commerce – Setup – Configuration - > Store tab.
Set the Country Name to United Kingdom
Set your Zone Name to Bristol.
Geo Zone
Go to Components > J2Commerce > Localization > Geo Zones > New
Setting up the Parameters
Geo Zone Name: VAT Zone ( It can be anything. It is used just as a reference )
Status: Enabled
Add Country / Zone: Choose United Kingdom from the Dropdown list and add it
IMPORTANT: According to the rule, EU residents & businesses with no valid VAT number have to be charged based on the home country’s rate.
So it is advised that you add all the EU countries to this Geo Zone itself. Choose EU VAT countries and add them. Refer to this article to know all EU VAT countries. http://en.wikipedia.org/wiki/European_Union_value_added_tax
(You can also add all other European countries, or create a separate Geo Zone. But then you will have to create a tax rate and map that in the tax profile. Kind of a double work!).
Save and close
Tax rate
Go to Components > J2Commerce > Localization > Tax Rates > New
Name: VAT Rate
Tax Percent: 21
Geo Zone: VAT Zone
Status: Enabled
Setting up the tax profile
It is sufficient to set up ONE tax profile
Go to Components > J2Commerce > Localization > Tax Profiles > New
Tax Profile Name: My Tax Profile
Enabled: Yes
VAT Rate: 21 %
Associated Address: Billing Address
Save.
Applying a tax profile to a product
J2Commerce uses native Joomla! articles as products. So go ahead and create a product.
Go to Content > Articles > New or open your digital product.
In J2Commerce (J2Store Tab) > Tax Profile > Choose My Tax Profile.
Fill in other relevant fields for your product and save.
Implementation
Let us assume that your company is located in : United Kingdom, Bristol, and your home country (local ) VAT is 21 %
Store Profile
Go to Components > J2Commerce > Setup > Store Profiles > Your store profile.
Set the Default Country to the United Kingdom.
Set your Default Zone to Bristol
Tax rule for Home Country
First, we should define the Geo Zone and tax rates for the home country, that is the country in which your shop is located.
Define Geo Zone
Go to Components > J2Commerce > Localization > Geozones > New
Setting the parameters:
Geo Zone Name: Home VAT Zone ( It can be anything. It is used just as a reference )
Status: Published
Add country / Zone: Choose United Kingdom from the Dropdown list and add it
Save and close
Define Tax rate
Define Tax rate
Go to Joomla admin > J2Commerce > Localization > Geo Zones > New
Setting the parameters:
Geo Zones Name: Germany
VAT Zone: ( It can be anything. It is used just as a reference )
Status: Published
Add country / Zone: Choose Germany from the Dropdown list and add it
NOTE: If some other EU countries also implement a 25 % VAT, then you can group them under this geo zone itself.
Save and close
Setting up the tax profile
It is sufficient to set up ONE tax profile for digital goods, in which we can associate many tax rates.
`Go to Joomla admin > Components > J2Commerce > Localization > Tax profiles > New
Setting the parameters:
Tax Profile Name: Digital Goods Tax Profile
Enabled: Yes
Tax Rates Mapping
Home VAT Rate: 21 %
Associated Address: Choose Billing Address
Germany VAT Rate: 25 %
Associated Address: Choose Billing Address
Save.
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Applying tax profile to a product
J2Commerce uses native Joomla! articles as products. So go ahead and create a product by going to Content > Articles > New
Application of VAT rules with Examples: Now we have successfully configured the tax rules in J2Commerce. Let us see how they will be applied to different scenarios
Example 1:
Buyer ( can be an INDIVIDUAL or company ) from the same country (Home country )
Our shop is located in the United Kingdom. And the buyer is from the same country. So the local tax of 21 percent applies.
Example 2:
Buyer ( INDIVIDUAL ) from a different EU country (Germany )
The buyer is from Germany and he is an Individual customer. So we are charging him the Germany’s VAT rate of 25 %
Example 3:
Buyer ( COMPANY ) from a different EU country WITHOUT a valid VAT Number
The customer is from Germany. He has entered a company name. But his VAT number is INVALID. So we apply Germany’s VAT rate of 25 %.
(The EU VAT plugin validates the VAT number provided against the EU database.)
Example 4:
Buyer ( COMPANY ) from a different EU country WITH a valid VAT Number
The customer is from Germany. His VAT number is VALID. So NO tax is applied.