Some countries around the would charge what is called a "value-added tax", or most commonly known as "VAT", on their goods and services. Depending on which stage your business is in of the supply chain there can be different VAT rates. If you are a manufacturer, wholesaler, b2b, and offer services all for the same product/product types you may need more than one VAT Tax. In this case, I am going to do a simple product that is shipping within Germany.
Configuring Magento 2 VAT Tax
The following instructions include a tutorial on how to set up a 19% VAT in the country of Germany for direct sales (B2C) to retail customers. For other tax rates and countries, follow the general procedure but enter the correct information that corresponds to your country, VAT rate, customer types that you need Magento to manage for you.
Before proceeding, make sure to find out which rules and regulations apply to VAT in your area and write them out on paper or notepad file. Organization will keep you from pulling your hair out and keep you on task and focused.
In certain business-to-business transactions, VAT is not assessed. Magento can validate a customer’s VAT ID to ensure that VAT is assessed (or not assessed) properly. I'll write on this in the future.
Process Overview:
- Step 1: Set Up Tax Zones and Rates
- Step 2: Set Up Customer Tax Classes
- Step 3: Set Up Product Tax Classes
- Step 4: Apply Tax Classes to Products
Step 1: Set Up Tax Zones and Rates
1. On the Admin sidebar, tap Stores. Then under Taxes, choose Tax Zones and Rates. See the screenshot above.
2. In the upper-right corner, tap Add New Tax Rate. Then, add the following new tax rates:
VAT Standard Rate Tax Identifier: VAT Standard
Zip/Post Code: * (a "*" means all zip codes)
State: * (a "*" means all states)
Country: Germany
Rate Percent: 19.00
3. Tap Save Rate for your new rate.
If you have many tax rates, you can use the grid filter controls to list only the new VAT rates.
Step 2: Set Up Customer Tax Classes
1. On the Magento 2 Admin sidebar, tap Stores. Then choose Tax Rules from the menu items.
2. Expand the Additional Settings section at the bottom of the screen and do the following steps:
a. In the Customer Tax Class box, make sure that there is an appropriate customer tax class to use with the VAT. If you need to create an additional class, tap Add New Tax Class. ***In this example I used the stock "Retail Customer" customer tax class group.
b. Enter a Name for the new customer tax class, and tap the checkmark to Save.
Step 3: Set Up Product Tax Classes
1. In the Product Tax Class box, tap Add New Tax Class, Then, create the following product tax
classes: "VAT Standard"
2. Tap the checkmark to Save each new class.
Step 4: Set Up Tax Rules in Product
1. On the Admin sidebar, tap Products. Then under Inventory, choose Catalog.
2. Open a product from your catalog in edit mode.
3. Under Product Details, set Tax Class to the VAT class that you want to use for the product.
4. When complete, tap Save and you should be charging 19% VAT Tax when someone order's this item.