If you are required to charge buyers a value added tax (VAT) or a goods and services tax (GST), we recommend using the module Value Added Tax / Goods and Services Tax for tax setup. xc5_taxes_vat_module.png

This module is specifically designed for businesses in the UK, EU, Australia and other countries where you need to be able to charge VAT / GST. The module allows you to use different tax rates based on the membership level and address of the customer. It also supports tax exemption based on customer’s VAT ID.

Note that we have a special module for Canadian taxes.

To start using the module “Value Added Tax / Goods and Services Tax”, ensure that it is installed and enabled in your store’s Installed Modules section.

This article explains how to set up and enable VAT / GST calculation using the module “Value Added Tax / Goods and Services Tax” for X-Cart 5. 

A video tutorial is also available:

Configuring VAT / GST

Before you configure your VAT / GST tax:

  1. Ensure that each of the products in your store to which VAT / GST needs to be applied has a tax class assigned to it. You can create your custom tax classes or use the “Default tax class” that is assigned to all your products by default. 

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  2. Ensure that your store has all the necessary address zones configured. You will need these zones to use different tax rates based on the customer address.

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  3. If you are going to need different tax rates for different customer membership levels, ensure that the necessary user membership levels have been set up.

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To configure your VAT / GST tax, complete the following steps:

  1. In your store’s Admin area, go to the Taxes section (Store setup > Taxes). xc5_taxes_vat_taxes_section.png

  2. Make sure you are viewing the VAT / GST tab. xc5_taxes_vat_vatgst_tab.png

  3. Configure the tax options in the Common tax settings section: xc5_taxes_vat_common_settings.png

    • Use the Tax title field to enter a general name describing the type of tax applied to orders in your store. This name will show on your store’s checkout and on your customers’ invoices. By default, VAT is used as the tax title, but you can change it to GST or any other name you require.

    • Specify whether tax calculation rules for the tax you are configuring (we’ll come to configuring these rules a bit later) should be the same for all your store’s users, irrespective of their membership, or should be different depending on the users’ membership. If the rules need to be the same for all your buyers, enable the option Use the same tax rates for all user membership levels by selecting the respective check box. If different membership levels need the tax to be calculated differently, leave this check box unselected.

    • Use the selectbox titled Address for VAT / GST calculation to specify the address type based on which your VAT / GST tax needs to be calculated. The available options here are Shipping address and Billing address. The address type you select here will be used to determine the customer’s zone, which in its turn will be used to determine the tax rate that needs to be applied. For example, to charge tax based on where the product is being shipped to (not where it was purchased), you would need to choose the Shipping address option in this field.

    • You might already have set the product prices in your store’s catalog including the VAT/GST tax rate for a certain location and/or user membership. If, however, you expect to serve customers not only from that location, but also from other regions, or you have other user membership levels for which you must not charge the VAT/GST tax at all, or must charge a different VAT/GST rate, you will need to somehow deduct the included VAT/GST tax amount from the prices or to use a different VAT/GST rate to calculate the prices correctly. To automate this process, we provided the setting The VAT inclusive prices as defined in the product details are intended for. Use this setting to specify the address zone (or the membership and the address zone), the VAT/GST tax for which was included into product prices when you defined the prices for the products in your catalog. This way the VAT/GST amount applied to a product will be adjusted based on the location and membership of the customer: customers whose location and membership level match the location and membership level specified in the section “The VAT inclusive prices as defined in the product details are intended for” will get exactly the prices defined in the product details. For customers with a location and a membership level different from those specified in the section “The VAT inclusive prices as defined in the product details are intended for”, product prices will be recalculated based on the VAT rate for their respective location and membership level. Note that the field for selecting memberships is made available in this section only when the option “Use the same tax rates for all user membership levels” is disabled: xc5_taxes_vat_memberships.png

    • Use the setting Display prices in catalog including VAT / GST to specify, whether the product prices in your store’s catalog should be displayed with VAT / GST included, or not. Note that this setting affects only the way the prices are displayed. If the prices in the database do not include VAT / GST, enabling the option “Display prices in catalog including VAT / GST” will result in that an appropriate tax rate will be added to the price before it is displayed in the catalog. If the prices in the database are set including VAT / GST, enabling the option “Display prices in catalog including VAT / GST” will result in that the tax rate will be subtracted from the price before the price is displayed.

    • X-Cart can display product prices with the label ‘inc VAT’ or ‘ex VAT’ displayed next to them - depending on whether VAT / GST is included into the price or not. Use the setting Display ‘inc/ex VAT’ labels next to prices to specify, whether you want to use such labels, and if so, on which pages the labels should be shown.
      • Never means that the labels will not be used anywhere in the catalog. Not that if you choose not to use the labels, you will still have to find a way to place information as to whether your prices include the tax somewhere on the catalog pages as it must be made clear to your customers.
      • On product details pages only means that the labels will be used only for the prices displayed on the pages showing detailed product info, and not used on any other pages.
      • On all catalog pages means that the labels will be used everywhere in the catalog where product prices are shown.
    • In the Merchant Tax Number field, specify your tax identification number. This value will be shown on the invoices of orders with VAT applied. If you need to change the wording of this phrase (for example, to “VAT ID” or “ABN”) follow the “Rename label” link below the field name to do it.
  4. Set up the VAT/GST tax rates you require. For more info, see the section “Setting up your VAT / GST tax rates” further in this article.

  5. Make sure the VAT/GST tax calculation is enabled in your store. This is controlled by the Tax enabled/Tax disabled button to the right of the “Tax title” field. xc5_taxes_vat_tax_enabled.png

  6. Click the Save changes button at the bottom of the page to save the changes.

Setting up your VAT / GST tax rates

You need to set up VAT / GST rates to configure VAT / GST tax calculation:

  1. In the section Rates / Conditions in the lower part of the page, click the button New rate. xc5_taxes_vat_rate_setup1.png

  2. In the section that expands below, provide information about a new VAT/GST rate: xc5_taxes_vat_rate_setup2.png

    • Zone: Specify the address zone to which the tax rate should be applied. The tax rate will be applied to orders of customers whose address belongs to the selected address zone. Whether it is their Billing or Shipping address depends on the option selected in the “Address for VAT / GST calculation” field of common tax settings.

    • Tax class: Specify the type of products (tax class) to which the tax rate should be applied. For example, if you select the Default tax class option here, the tax rate will be applied to all the products that have the default tax class assigned. 

    • User membership: Specify the user membership level for which the tax rate should be applied. The option Ignore membership allows you to create a tax rate that will be applied to all orders irrespective of the buyer’s membership (Note: The “User membership” column becomes available when the option “Use the same tax rates for all user membership levels” is disabled in the common tax settings).

    • Rate: Specify the tax rate amount as a percentage of the selected taxable base.

  3. If necessary, use the New rate button to add rows for more tax rates. Complete the fields in each row as you require.

  4. Click the Save changes button at the bottom of the page to save the changes.

Enabling/Disabling VAT / GST calculation

Once configured and enabled, VAT / GST calculation can be disabled/re-enabled using the  Tax enabled/Tax disabled button to the right of the Tax title field on the VAT / GST panel in the Taxes section (Store setup > Taxes).

xc5_taxes_vat_tax_enabled.png

When VAT / GST calculation is enabled, the button shows as Tax enabled, and the On/Off icon on the button is green. When it is disabled, the button shows as Tax disabled, and the icon is grey.

Some examples of VAT setup

Let us consider a few typical cases of tax setup that can be implemented using the module VAT / GST:

I. Set VAT-inclusive prices for the country where you do business

For example, you are doing business in Germany. In Germany, prices are usually set including VAT, so we need to set VAT-inclusive prices. Most types of goods in Germany require a VAT rate of 19%.

To set up VAT-inclusive prices for sales in Germany, follow these steps:

  1. When adding products to your catalog via your store back end, enter product prices with VAT included - the way they do it in Germany. For example, let’s take a product and set its price at 119 euro (This price includes the base price of 100 euro + VAT of 19 euro, which corresponds to 19% of the base price of 100 euro).

  2. Set up a zone for Germany. Buyers from this zone will have to pay VAT 19%.

  3. Go to Store setup > Taxes and set up VAT adjusting the tax settings as follows:

    • The VAT / GST inclusive prices as defined in the product details are intended for: Specify the zone you created for Germany. This is to say that the product prices entered in the store back end are true for Germany.

    • Enable the option Display prices in catalog including VAT / GST.

    • Adjust the setting Display ‘inc/ex VAT’ labels next to prices according to your needs. If you want the label “including VAT” to be displayed, select “On all catalog pages” or “On product details pages only”. If you do not want to use the label, set this to “Never” (In this case you will have to inform your customers that the prices on your site are VAT-inclusive in some other way).

  4. Set the VAT rate for Germany to 19%

II. Set prices and VAT for different countries in Europe (VAT included)

For example, your business is based in Germany, and you sell products to buyers from Germany and other European countries (Spain, Russia, etc.)

  1. When adding products to your catalog via your store back end, enter product prices with VAT included - the way you are used to do it in Germany. Most types of goods in Germany require a VAT rate of 19%. For the sake of example, let’s take a product and set its price at 119 euro. This price includes the base price of 100 euro + VAT of 19 euro, which corresponds to 19% of the base price of 100 euro.

  2. Set up a zone for each country to which you are going to sell products and which needs a separate VAT rate (for example, a zone for Germany, a zone for Spain, a zone for Russia, etc.)

  3. Go to Store setup > Taxes and set up VAT adjusting the tax settings as follows:

    • The VAT / GST inclusive prices as defined in the product details are intended for: Specify the zone you created for Germany. This is to say that the product prices entered in the store back end are true for Germany.

    • Enable the option Display prices in catalog including VAT / GST.

    • Adjust the setting Display ‘inc/ex VAT’ labels next to prices according to your needs.

  4. Configure the VAT rates you require for each of the zones. For example, VAT rate for Germany = 19%, VAT rate for Spain = 21%, etc. (Please note that the VAT rates specified here are used for example only; be sure to always get the correct rates for all the countries with which you do business from authorized institutions.) Russia is not part of EU, which means you must not charge European VAT on sales to Russia. To enable Russian buyers to see the correct product prices not including VAT, set the VAT rate for Russia as 0%.

With prices and VAT configured as described above, a buyer from Germany will see the prices the way you entered them in the product details. For buyers from other countries, the prices will be adjusted according to the buyer zone (To display the correct VAT-inclusive prices to visitors from zones other than Germany, the system will subtract the VAT amount for Germany from the product price to find the base price of the product; then it will calculate the VAT amount for the zone from which the visitor is from and add this amount to the base product price.)

This way the product from our example - the one for which we set the price at 119 euro - will cost 119 euro (including 19% VAT) for Germany, 121 euro (including 21% VAT) for Spain, and 100 euro (including 0% VAT) for Russia.

III. Set prices without VAT and configure taxes in such a way that VAT would be applied for specific zones

In this case, we want to be able to set product prices without VAT, but still want VAT to be applied if the buyer comes from a zone that requires the use of VAT - or not to be applied if the buyer comes from a zone that does not use VAT.

  1. When adding products to your catalog via your store back end, enter product prices without VAT.

  2. Set up a zone for each country where you need to use VAT (You will use these zones to set VAT rates). Also set up a zone for the country/countries for which you do not need to use VAT.

  3. Go to Store setup > Taxes and set up VAT adjusting the tax settings as follows:

    • The VAT / GST inclusive prices as defined in the product details are intended for: Specify the zone you created for the country or countries with no VAT.

    • Enable the option Display prices in catalog including VAT / GST.

    • Adjust the setting Display ‘inc/ex VAT’ labels next to prices according to your needs. If you want the label “including VAT” to be displayed, select “On all catalog pages” or “On product details pages only”. If you do not want to use the label, set this to “Never” (In this case you will have to inform your customers that the prices on your site are VAT-inclusive in some other way).

  4. Configure the VAT rates you require for each of the zones. For example: VAT rate for [zone that must use VAT] = 20% VAT rate for [zone without VAT] = 0%

IV. Set up prices and VAT in such a way that the prices in the Admin area would not include VAT, the prices in the Customer area would be shown without VAT (with the “excluding VAT” label shown next to them), but VAT would be added at checkout.

  1. When adding products to your catalog via your store back end, enter product prices without VAT.

  2. Set up a zone for each country where you need to use VAT (You will use these zones to set VAT rates). Also set up a zone for the country/countries for which you do not need to use VAT.

  3. Go to Store setup > Taxes and set up VAT adjusting the tax settings as follows:

    • The VAT / GST inclusive prices as defined in the product details are intended for: Specify the zone you created for the country or countries with no VAT.

    • Disable the option Display prices in catalog including VAT / GST.

    • Set Display ‘inc/ex VAT’ labels next to prices to ether “On all catalog pages” or “On product details pages only”. (Remember, we want the “excluding VAT” label).

  4. Configure the VAT rates you require for each of the zones. For example: VAT rate for [zone that must use VAT] = 20% VAT rate for [zone without VAT] = 0%

Related pages:

See also: