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How can I set up correct taxation for EU to allow valid tax exemption?

Article ID: 979, created on Oct 6, 2008, last review on May 11, 2014

APPLIES TO:
  • Odin Business Automation Standard 3.2

Resolution

Say you are a provider from Germany.

Rules for Taxation are as follows:

  • A customer from Germany with VAT number: The tax must be applied (the tax will be added to the order/invoice)
  • A customer from Germany without VAT number: The tax must be applied (the tax will be added to the order/invoice)
  • A customer from EU country with VAT number (business accounts only): The tax must be exempted (the tax will NOT be added to the order/invoice)
  • A customer from EU country without VAT number: The tax must be applied (the tax will be added to the order/invoice)
  • A customer from non-EU country: The tax must NOT be applied at all

Thus, you just need to set up taxation in HSPc:

  1. Create two tax rates at Top > Billing Director > Taxation Manager > Tax Rates:
    • "MwSt"- Tax rate for customers from Germany. Rate = 16%
    • "VAT" - Tax rate for customers from EU. Rate = 16%
  2. Create a default tax zone without any tax rate. It will be applied for non-EU customers at Top > Billing Director > Taxation Manager > Tax Zones.
  3. Create separate tax zones for each EU country with a 16% tax rate. The tax zone for Germany must be "MwSt." It must be "VAT" for all other EU countries, i.e., each country must have its own zone at Top > Billing Director > Taxation Manager > Tax Zones.
  4. Set up Tax calculation mode at Top > Billing Director > Taxation Manager > Setup, depending on the options to include tax in the price:
    • HP prices do not include taxes.
    • Automatically approve VAT numbers for EU customers (do NOT use the option for tax exemption enabling).
    • HP prices include taxes from the native tax zone (set up native tax zone as Germany's tax zone).
  5. The VAT number will be used for tax exemption automatically (as soon as a customer enters it in the Online store during the very first registration or later sets it in the Control panel, or you set it for the customer via PCC/RCC), unless you set taxation in "secure" mode as follows: Top > Billing Director > Taxation Manager > Setup > Prevent orders from being paid until following information is approved > Customer tax exemption code (if any). If you set this setting to "ON," you will have to approve the VAT number manually.

If you set all settings as mentioned above, then:

  • Customers from Germany will always be taxed.
  • Customers from EU countries will be taxed in accordance with VAT number presence.
  • Customers from non-EU countries will not be taxed at all.
For detailed information regarding taxation configuration, refer to this article in HSPcomplete Provider's Guide.



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