Setting VAT on Shipping Charges
page last edited on 14 March 2019
VAT/GST taxation may include the shipping costs as well as it is part of the service you are providing. The Value Added Tax / Goods and Services Tax addon makes it possible to add special VAT rates on delivery options available for customers and display this information at checkout.
Once the “VAT/GST” addon is installed and enabled it adds a possibility to assign special tax classes to shipping methods enabled in the store to add VAT to the delivery costs. By default, all delivery costs are VAT-exclusive.
There are 2 defaut shipping tax classes that can be used to add VAT to shipping rates - Zero VAT rate and Items Max VAT rate. The difference between these two tax classes is that Zero VAT rate class doesn’t add VAT to delivery costs while Items Max VAT rate do. The VAT rate added to the delivery costs by the Items Max VAT rate tax class equals the maximum VAT rate set on the products being added to cart.
For example, there are 2 products in the cart - Product 1 at the cost of £100 (VAT 20% included, i.e. price £83.33 + VAT £16,67) and Product 2 at the cost of $100 (VAT 5% included, i.e. price £95,24 + VAT £4,76). In case Items Max VAT rate tax class is applied to the delivery method chosen by a customer, the VAT 20% rate will be added to the shipping costs and included into the total amount of VAT 20% displayed to a customer.
In order to apply VAT/GST taxation to shipping complete the following steps:
Configure delivery options as described in the Shipping section of this manual.
- Once the shipping methods are configured, add a special shipping tax class to them:
Locate the Tax class column on the Shipping methods settings page (Store setup -> Shipping):
Click on a tax class opposite the shipping method name to change the settings:
The options you’ll see in the Tax class dropdown on the shipping settings page will vary depending on the Tax Classes you’ve set up in your store. You can choose any tax class with the configured VAT rate and apply it to shipping.
- Zero VAT rate : Choose this tax class if you don’t want to charge VAT on delivery costs.
- Items Max VAT rate (default value) : Choose this tax class if you need to charge VAT on delivery costs. A VAT rate added to the delivery costs will equal the maximun VAT rate set on the products being added to cart.
- Any other tax class from the list : Choose a tax class with a configured VAT rate if you need to charge VAT on delivery costs. A VAT rate added to the delivery costs will depend on the VAT rate set for the tax class you’ve chosen.
- Click Save changes to activate the settings.
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