Setting Up Taxes for European Union (EU) Sales

Setting Up Taxes for European Union (EU) Sales

For Woosage50 users in EU countries that trade with other EU countries (regardless of whether they trade with non-EU countries) the following tax rules apply, particularly in relation to trade sales, where the customer may be registered for sales tax in another EU country.

There is a requirement to account for and to report on inter-country sales within the EU and this is handled automatically within WooCommerce using various plugins and in Sage, by assigning the transactions with the appropriate T-codes.

Broadly, the rules for goods and services sold to a customer registered for VAT (sales tax) in another EU country are:
  1. If the customer is VAT registered in their country and provide a valid VAT number (such as a VAT or TVA registration code) then the transaction is treated as zero-rated.  The validated VAT number should be shown on the invoice and the sales included in the summary of sales to EU countries. Sage usually identifies this using code T4.
  1. If they do not provide a valid VAT number, then you should treat the sale as though it was to a customer within your country.

Note: this is not intended to be an exhaustive explanation of EU VAT rules and we recommend taking advice from a tax specialist, particularly if you sell digital products, which are not covered here.

EU VAT numbers have the form: 

CC XXX…XXX

Where:

CC is the relevant 2-character country code such as GB, FR, DE, DK etc.

XXX…XXX is the local VAT code for the organisation, which is between 8 and 12 alpha-numeric characters in length, depending on the country

If you sell to EU countries that there are several plugins that will automatically validate VAT numbers using the VIES system, store VAT numbers as evidence and zero-rate EU sales.

Woosage50 currently supports the following EU VAT plugins:
  1. EU VAT Number - developed by WooCommerce
  2. EU VAT Assistant – developed by Aelia
If using one of these plugins, Woosage50 will automatically detect and deal with EU VAT by checking for the presence of a validated VAT number and zero tax. 

Note that it is possible to setup the plugins to set tax to zero for a validated VAT code supplied by a customer in your own country and we recommend you do not apply such options. 
In order to ensure the correct treatment of tax in Sage you must carry out the following steps:
  1. Define WooCommerce tax codes for the relevant classes for all EU countries set at your local tax rates (not the EU country rates). We can provide a CSV file with these that can be loaded imported directly into the WooCommerce Standard tax rates. 
  2. Map the standard rate codes in Woosage50, assigning your own country to T1 and the remaining EU countries to T4.
  3. create any zero or reduced rates and map them to the appropriate T2 code in Woosage50.
During WooCommerce order processing the tax will be applied by location and class and if the user provides a valid VAT code then the EU VAT plugins will store VAT numbers and set the tax to zero.  As the order is processed by Woosage50 the presence of the validated VAT number will trigger zero tax the appropriate code will be used, thereby picking up the correct T-code from the mapping table.
Note: if you use the absence of tax code to apply zero tax to product and/or shipping, then tax will not be mapped correctly in Sage.


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