The new VAT update gives an advantage on the price handling. This function allows you to add one standard price (inclusive of VAT) for a product. Then, based on that standard price, the VAT will be calculated flexibly according to the chosen VAT delivery country.
What is the difference?
Earlier, we added different prices based on if it was inclusive or exclusive of VAT in the admin, and the website calculated the VAT automatically based on the percentage added for each country.
Since the website displayed different prices for each country, also considering the “Inclusive / Exclusive of VAT” selection made by the buyers under audience selector, it was a lot of work to manage, especially when multiple countries had the same currency, leading to multiple errors.
Point to remember: This works only if the same currency is used for multiple countries.
What has changed?
Old process: Inclusive of VAT, prices were calculated automatically
- The same VAT was applied to all the countries, unless the option “VAT by Country” was selected explicitly.
- This selection “Prices are entered exclusive of VAT” was mandatory to enter different VAT per country under Settings >> VAT >> General.
Then, based on the VAT entered for different countries, the final price was calculated and displayed on the website.
For example, VAT for Sweden is 25%, and Germany is 19%
The base price of the product: 100 SEK (Price is exclusive of VAT)
Price on website:
If Germany is the delivery country: 119 SEK
If Sweden is the delivery country: 125 SEK
New process: Exclusive of VAT, price will be calculated flexibly
- The option “VAT by Country” works even with option “Prices entered are inclusive of VAT”.
- There are no additional settings involved to activate this.
The base price is always inclusive of VAT, irrespective of the VAT country of delivery.
For example, VAT for Sweden is 25% and Germany is 19%.
A product that costs 100 SEK inclusive of VAT will cost 80 SEK exclusive of VAT if Sweden is chosen as the delivery country and 84.03 SEK if Germany is picked as the delivery country.
But if you are selecting the “Inclusive of VAT” price display, then it will be 100 SEK no matter what delivery country is chosen.
The VAT will be calculated based on the base price, which is 100 SEK in this case.
- One base price for all countries using the same currency
- Flexible price / Excl VAT calculation based on Incl of VAT price
- Activate “VAT per Country” under Settings >> VAT >> VAT per country.
- Enable “Prices are entered inclusive of VAT” option under Settings >> VAT >> General.
- Enter the VAT for different countries by selecting them from the drop-down.
- If the delivery country has a VAT-by-country entry, then the entered VAT rate will be used
- If the delivery country has no VAT-by-country entry, the VAT rate of the default country will be used.
- The default country is set under Settings >> VAT >> VAT rates >> VAT country.