EU VAT

In this guide...

• How Simplero handles EU VAT
• VAT Rates
  • Where do we get the VAT rates from?
  • How does Simplero determine the VAT rate for each purchase?
  • Editing the tax rate after purchase
    
  • Overriding tax rate per product
• EU VAT Number
  • EU VAT Number Validation
  • Troubleshooting EU VAT Numbers not accepted
• Tax Report

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.

VAT Rates

Where do we get the VAT rates from?

We have the VAT rates, as we know them, for each EU member country, loaded from the start in your settings - taxes page. We'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 us know. You are able to edit them on that page if they are incorrect. 

How does Simplero determine the VAT rate for each purchase? 

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. You can turn on this option on your settings - taxes page:

Editing the tax rate after purchase

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. You can do that by:

• Editing the charge from inside the purchase:
  
  
  
• Clicking on Adjust Collected Tax inside the purchase after you have done that
  
  

Overriding tax rate per product

Some EU member states have different VAT rates for different types of products. You can adjust this by clicking on Per-country overrides inside each product configure page. This will override the rates set in the account settings:

EU VAT Number

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. You can do that from your Product - Order Form tab by turning on the option Only allow sales to customers who have a valid EU VAT no: 

The rules for EU VAT are complicated. For each product, we have a setting to always charge your home country's VAT regardless of whether or not your customer has a valid VAT number, one that will charge your home country's VAT unless your customer has a valid VAT number, one that will charge your home country's VAT when your customer doesn't have a valid VAT number and one to charge VAT based on the customer's home country's VAT.  We've tried to cover all the bases. Go to the configure page in your product to see those options:

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 enabled the "Only allow sales to customers who have a valid EU VAT no." box on the "Order Form" page of the Product. 

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

Daily, we check all purchases that require VAT and that have future charges and check the VAT number validity.

If the VAT has changed from valid to invalid, or vice versa, we recalculate taxes and send an email to the account owner to take further action.

*Note: If your Global Tax Settings are set to EU/UK, customers will still be charged for VAT if they add their VAT number to the order form, even if the product is exempt from all taxes. If you have a product exempt from taxes and you don't want to charge them by mistake, we recommend turning off the “Company name & EU VAT no.” purchase field, if you don’t need that info for this particular product.

You can find that setting on the Order form page inside your product:

Troubleshooting VAT numbers not accepted

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 (for 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.

Tax report

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 find this on your invoices page, by clicking on the three dots on the top right corner and clicking on tax report:

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.