EU Vat

How Simplero Handles EU VAT

With Simplero, we've done everything we know of to handle EU VAT correctly for you.

That said, we're not tax lawyers, and finding usable information on what the laws actually are across all the member states have been challenging to say the least.

At the end of the day, handling EU VAT correctly is going to be your responsibility as the business owner. We cannot assume any liability here.

With that out of the way, let me explain what we're actually doing.

First, we have the VAT rates, as we know them, for each EU member country, loaded from the start. I've been searching for a canonical source of VAT rates, preferably in machine-readable format, but haven't been able to find it yet. If you know of one, please let me know.

The VAT rate charged will be based on the customer's country. The customer will tell us what their country is, and by default, we'll believe them. However, with EU VAT that may get you in trouble, so you have the option of locking down the country field so that we'll automatically populate it from the IP address they're coming from. This is not perfect. I know I've sometimes been in Denmark, and the IP address would look like it was coming from Sweden, especially if connecting via the personal hotspot on my cell phone, but this is the best information we have.

If the incorrect VAT amount is charged, we make it easy to correct it later on—either refund a bit or charge a bit extra.

We collect the EU VAT number if they have one, we validate it, and we do what's right in those cases. Typically, it means no VAT will be collected, except if you and the customer are in the same country, in which case VAT will still be charged.

You can set your product to always require a valid VAT number, so you can only sell to people in the EU if they have a valid VAT number. If the customer is outside the EU, they can still buy.

The rules for EU VAT are complicated. We have a setting for products that include a "live" element, which would make them exempt from EU VAT. We have a setting for products that have a live element that takes place in your home country, and your home country is in the EU, which means that your own country's VAT rate will be used even for customers from another EU country.

I've been told some EU member states have different VAT rates for different types of products, and this is not something we have implemented. If this is an issue for you, get in touch, and we'll look into it.

As for reporting, we'll give you a breakdown of taxes collected for each region, for any time period, where you can drill down for each region and see exactly which purchases the VAT has been collected for, so you can easily verify everything.

You can also download this report as a CSV or Excel file, which you can then modify and/or upload to other places, as needed.

We use Simplero to charge for Simplero and run our own business, and we need to collect EU VAT from both our US and our Danish companies, so we're very much relying on this functionality ourselves.

 

EU VAT Number Validation

When selling to business customers in the EU, or when you yourself are based in the EU, a valid VAT number is required on purchase in order to sell a product without VAT in accordance with the reverse VAT rules of the EU.

In Simplero we remove the VAT automatically if a valid VAT number is supplied. The VAT number is checked against the EU database (VIES), and if it's not recognized, the customer gets an error message and VAT is not deducted. However, the purchase can be completed without VAT unless you have checked the "EU VAT only" box on the "Configure" page of the Product

Tax_options_for_EU_VAT_no

To get the VAT field to show on the order form, you need to include Company name under Purchase Fields in the Order form setup.

VAT_Company_name_in_Order_form

 

Troubleshooting

If the VAT number is not accepted, this can be for one of several reasons. These reasons apply to both your purchase of Simplero and customers purchasing from you:

  1. You typed in the wrong number (obvious reason, but happens a lot)
  2. The EU database is down. That, unfortunately, happens from time to time – try again later or complete the purchase with VAT and then deduct the VAT on your VAT registration with your local VAT authorities.
  3. The VAT number is not valid for VAT deduction. You can verify that a VAT number is, in fact, valid for deduction on the VIES registry. In Denmark, this is a common reason for a VAT number not being accepted, since it can have a business number ("CVR/SE-nummer") but not be registered for VAT. If you are in a specific niche like healthcare and some types of education. For Danish businesses, you can check it here. If your business is in another EU country, and similar rules apply, please let us know if you have a link to a local VAT number check you would like us to include in this guide.

If you are running on international business check out this guide for more support