How does EU VAT work with ChargeBee?

~ 3 min read | May 26

Update: Beginning from January 1 2015, EU VAT rules on the of sale digital goods and services will be changed. Learn more at http://euvat.chargebee.com

As a startup operating in the EU, it is crucial for you to know and understand VAT. VAT is the Tax paid by businesses for the products and services that they provide. If you are wondering where VAT does and does not apply, you can read all about it in our previous blog.

So how does EU VAT work in ChargeBee?

Lets jump right to it!

There are a few important settings that you will need to configure for VAT to work flawlessly:
Under the ‘ Settings’ tab, go to ‘Site Info’, where you need to select the ‘Currency’ you want to charge your customers in and the ‘Country’ your business in domiciled.

ChargeBee - Site Info
  1. Then go to the ‘Taxes’ tab and Select ‘EU VAT’ and enter the ‘Label’ as well as the ‘Rate’- the percentage that should be applied on the amount payable before taxes. Here we are going to Label it ‘VAT’ and the ‘Rate’ set to 20%.
Configure Tax
  1. For the VAT number field to appear on the checkout page:
    Settings > Hosted Pages Settings > Field Configurations

VAT Field

Note: VAT number is set to Validate by default. We use VIES to validate the VAT numbers. This may be disabled for experimentation purposes. To disable VAT Validation goto Site Info.

Now you are all set. Let us see how it works:

Scenario 1:
The customer is from a different EU member state enters a valid VAT number. He is not charged with VAT.
Here is the checkout page:

Checkout VAT Exempted

Here is how the invoice would look like when VAT has been exempted:

Invoice VAT Exempted

NOTE: For the text ‘VAT is Exempted’ to appear on the invoice. under ‘Settings’ go to ‘Customize Invoice’ and enter your text under ‘Tax Exemption Text’

Scenario 2:
The customer is from the same country as the merchant. VAT is applied whether the VAT number is given or not.
Here is what the checkout page would look like:

Checkout with VAT

The invoice with VAT charge of 20%

Invoice with VAT

Note: VAT charges are applicable for EU customers who do not enter VAT number. VAT is applicable for customers only in EU and is not applied for customers outside EU.

If you are looking to experiment with the VAT numbers, Here are a few sample numbers that you could use:
For United Kingdom: 802311782
For Netherlands: 813323253B01
You could experiment by selecting the ‘Disable VAT Validation’ option under Site Info.

Are there any other scenarios or features you want us to explain the detail? We’d love to hear from you. Feel free to leave us a comment.

Further reading:
European Union VAT
Understanding VAT

Bhargavi P

Product Marketer at Chargebee. Coffee Addict, Music Explorer, Avid Reader, Poet.