Configuring Taxes 

Overview 

You can configure taxes for all taxable regions in your Chargebee site manually. Following are some of the salient features of tax configuration in Chargebee:

• The configuration of taxes is provided at each product/service level. Country-specific taxes are also configured at this level.
• You can create and manage multiple tax profiles when you are selling products or services that are subject to different tax rates and compliance.
• You can handle tax exemption for customers.
• You can also generate tax reports. Read Tax Reports to know more.

Prerequisites 

The following setting is a prerequisite that needs to be added before you configure taxes in your Chargebee site:

Organization Address: Providing your business' address is a mandatory step for configuring taxes in Chargebee. You cannot enable taxes in your Chargebee site without providing an organization address. Chargebee requires this information to calculate your tax liability.

To add your organization address in Chargebee, click Settings > Configure Chargebee > Business Profile > Add Address.

Configuring Taxes 

To configure taxes in your Chargebee site, follow these steps:

Step1: Enabling Tax 

Click Settings > Configure Chargebee > Taxes > Configure Tax. Click Add Address to add your organization address if you haven't added it already.

Step 2: Setting up Price Type 

Price type determines whether taxes are inclusive or exclusive with your product price. The price that you quote for your product or service in Chargebee can be either:

• Inclusive of tax, where tax is included in the product price, or
• Exclusive of tax, where tax is applied on top of the product price.

You might be selling in one currency or many. You can customize the price type for each one.

Here is an example of how Price Types work:

In this case, both the basic and professional plans are priced at 100 and 150 USD respectively. The price type 'exclusive' indicates that a 5% tax rate will be added to this price on the invoice.

In this case, both the basic and professional plans are priced at 80 GBP and 120 EUR respectively. The price type 'inclusive' indicates that this price will include a 20% tax rate on the invoice.

The prices of your plans and addons in Chargebee are set to tax-exclusive by default. You can customize the price type for each currency that you have added to your Chargebee site. You can edit this setting by following these steps:

1. In the Review Catalog Price Type page, select a currency to update the price type.

   

2. Select your preferred price type settings. When you select My prices are inclusive of the tax, you can optionally enable consistent pricing. Click here to read more about consistent pricing.

3. Once you are done, click Update and click I've reviewed the price types.

You can change the price type for your currencies at any time using the Manage Catalog Price Types link on the Configure Tax page.

Setting up Consistent Pricing (for Tax Inclusive)

If you have a global customer base and would want to charge all the customers the same price, you can make use of the Consistent Pricing option. This option allows you to have a flat-rate charge for your product or service, regardless of the taxes applicable and the customer's country/region.

To enable consistent pricing options, follow these steps:

1. In the Configure Tax page, click Manage Catalog Price type.

2. Select the currency and choose My prices are inclusive of the tax.

3. In the Tax included is that of drop-down, select the country of which the tax is to be included for the currency.

4. Enable the setting to display consistent checkout prices for all regions. You can optionally select the following settings as required:

   • Exclude tax from the price in regions for which tax is not configured in Chargebee: Select this option if you are selling products in a region where you do not need to collect tax (say, from the US to Mexico). The prices are reduced accordingly by removing the applicable tax.
   • For example:
     • Price in United States - $100 inclusive of 15% tax
     • Price in Mexico - $86.95 USD
   • For tax-exempt customers, reduce the price by removing the included tax instead of destination tax: By default, Chargebee uses the customer's location to calculate the tax component to be deducted in the case of exemptions. If you would like Chargebee to remove the tax included in the price instead of applying the destination tax, enable this option.
   • For example:
     • Price when sold to a regular customer - $100 inclusive of 15% tax
     • Price when sold to a Tax exempted customer - $100 inclusive of 15% tax (if this option is not enabled)
     • Price when sold to a Tax exempted customer - $86.95 removing 15% tax from $100 (if this option is enabled).

5. Third Party Integrations: When you have integrated your Chargebee site with Avalara for automated tax calculation, you can enable this setting to display consistent catalog prices in regions for which Avalara is configured. While a consistent rate is charged for your product or service, Avalara calculates the tax included from the catalog price for these regions.

   

   If you are using Chargebee's tax for all the regions, or if you have configured Avalara for tax automation in all your taxable regions, you do not have to select a country under Tax included is that of option.

   However, if you have some regions for which you manage taxes manually or via CSV, make sure that you select an appropriate country of which the tax is included for the currency. This is to ensure that the country whose tax is included is accounted for correctly while computing the catalog price. If you skip doing this, Chargebee treats the tax included for these regions as 0%.

6. Click Update.

Step 3: Adding Regions 

You can start adding regions where you have registered and are liable to collect tax. To add taxable regions to your Chargebee site, follow these steps:

1. In the Configure Taxes page, click Add Region and select the country from the drop-down list.

   

2. Pick your preferred mode of tax configuration for the region. You can select from the following:

   
   • Avalara: If you are using Avalara to automate tax calculation for your business, you can integrate your Chargebee site with Avalara and use it as your preferred mode of tax calculation.
   • TaxJar: If you are using TaxJar to automate tax calculation for your business, you can integrate your Chargebee site with TaxJar and use it as your preferred mode of tax calculation.
   • Upload your Tax: You can upload your tax details for this country as a CSV file, and Chargebee calculates taxes based on this file data. You can download and view the sample file for reference before uploading.
   • Manual: You can use this option if you want to manually add each of your tax components for this region. In the Add Tax pop-up, specify the Tax name and Tax rate, and click Save.
     

   Click Add Tax to add multiple tax components for this region as required. Once, the rates are provided, Chargebee will show you a summary of the rates you have configured and provide the options edit, or delete the tax rates, if the need arises.

   

3. For each country being added, you can optionally click Add Tax reg no. to provide the Tax Registration number as part of the configuration.

   • Choose your preferred label to be displayed in your Invoices, specify your tax registration number and click Save.

     

   • You can enable/disable Tax Registration Number to be captured from your customers from this region.

   • Additionally, you can choose to enable/disable the Tax Registration Number from customers for countries not configured for tax. If a country-specific setting is set up, it will take the highest precedence. For other countries not configured in the Tax Jurisdiction list, Chargebee displays Tax Registration number or the label you have provided in Text configuration settings for Hosted pages.

4. Once you have saved your settings for this region, you can go back to the Configure Tax page, and add more regions for tax configuration.

Via API

You can send the VAT Number via the vat_number field via the following APIs:

• Create Customer 
• Create Subscription 

Setting up price type for a currency vs. price type for a region

Price type regulations differ from country to country. Some countries, like the US, allow you to set your prices as inclusive or exclusive of tax as you see fit. Others, like New Zealand or Australia, require your invoices to display a price specifically inclusive or exclusive of taxes.

With Chargebee, you can plan for a scenario like this - you can set your prices to tax inclusive in some regions and tax-exclusive in others. If you are selling in a particular currency to customers around the world, you can set your price in that currency to be either tax inclusive or exclusive. Additionally, if some of the countries you are selling in have regulations that call for a particular price type, you can set your price in that country to be either tax inclusive or tax exclusive.

To configure region-specific price type for your checkout prices, navigate to Configure Taxes > Select region > click Manage in Your Checkout Prices are section.

Step 4: Configuring Tax Settings for Plans/Addons 

After configuring taxes and adding price types for your catalog prices, all the plans and addons in your Chargebee site become taxable. You can change this default setting for a specific plan/addon based on your requirements and tax compliance. You can update the taxability of your plans and addons in the following ways:

• Via Chargebee Site: While creating or editing a plan/addon price point, edit the This Plan/Addon is subject to taxes setting as shown in the below screenshot:

  

• Via API: While creating/editing a plan, set the taxable parameter as false to mark a product 'non-taxable'.

Setting up Multiple Tax Profiles 

If you sell different products which are subject to different tax rates in the same taxable country, you can set up multiple tax profiles in Chargebee for each of the taxable items.

Chargebee saves all your tax settings under an initial profile called "Primary" profile.

If you are selling a single category of products and don't need to apply different tax rates, you can maintain this single ‘Primary' tax Profile, with the tax rates configured across the countries you are planning to sell.

However, if you are selling products across different categories (digital and physical goods for example), and require different tax rates to be applied to different products in the same country, you can create different tax profiles to cater to the different products/rates.

Let's assume you are running ABC Solar company and selling the following products in Europe and the UK:

• ‘Solar Monthly Digest' (online magazine) - 20% Tax in the UK
• ‘Solar Panel installation services' - 5% Tax in the UK

To configure multiple tax profiles in your Chargebee site, follow these steps:

1. Click Settings > Configure Chargebee > Taxes > Configure Tax profile > Add Profile.

   

2. Specify a name to the new profile that you are creating and click Save.

3. Once the required tax profiles are added, you can view the profiles in all the taxable regions that you have added.

   

4. You can provide the tax rates for each profile, as required.

Once you have configured multiple tax profiles, go to the respective plans/addons price points and map them to their appropriate tax profile.

Deleting Tax Profiles 

You can delete the tax profiles(except the primary/default profile) that you created in Chargebee at any point in time. But before deleting the tax profile, you need to unlink the profile from any plans/addons that they are associated with. Unless you unlink the profile from associated plans/addons, you will not be able to delete it.

To delete an existing tax profile, follow these steps:

1. Click Settings > Configure Chargebee > Taxes > Manage Tax Profiles.
2. The existing tax profiles are displayed along with the options to edit/delete them.
3. Click the delete icon and click Delete Profile.

When a tax profile is deleted, it gets removed from every associated taxable region/country. However, the tax rates that were applied on existing invoices are not affected/changed.

Bulk Management of Taxes & Scheduling Tax Rates 

If you are running a business with tax obligations in many countries, configuring the tax rates for each country individually in your Chargebee site could be time consuming and cumbersome. You can do a bulk import and export of tax rates for multiple countries, states, pin codes, or even pin code ranges for all your tax profiles together using the Bulk management of Taxes feature. The sales taxes for your products and services are bound to change every now and then, across the world. Instead of manually updating the tax rates each time on your Chargebee site, you can export you current tax rates for multiple regions, and tax profiles, update them for select regions/time periods together and upload in bulk. You can introduce tax rate groups with effective start dates and end dates under tax profiles for each tax rate.

The applicable tax rates are automatically added to your Chargebee invoices based on the invoice dates. For example, while creating a backdated subscription, the backdated invoice will utilize the historic tax rate as applicable for the invoice date in the past. Similarly, any tax rate updates added for the future will be applied on your future invoices automatically without any manual intervention.

For example, let's say you upload a CSV file with updated Tax rate for Italy as 15% (as against the existing 13%)with start date specified as 21st of Aug, 2023 and end date specified as 21st of Aug, 2030. Invoices created with billing address in Italy from the 21st of Aug, 2023 will automatically have the updated tax rate of 15% applied.

Importing Taxes in Bulk 

In order to update tax rates in bulk with effective time periods, you must migrate any existing tax rates that you've configured manually on your Chargebee site for various regions and bulk update them via CSV upload. This is a one-time migration, and you can continue to update tax rates with effective time periods via bulk upload in the future.

To update tax rates with effective time periods, follow these steps on your Chargebee site:

1. Click Settings > Configure Chargebee > Taxes > Bulk Management of Taxes > Import Taxes.

   

   Before importing your file, always export your current taxes, make necessary changes on the file and update it to avoid any deletion of data.

2. You will be redirected to the Bulk Operations page with Import Taxes pre-selected. Click Proceed.

   

3. Follow the steps documented here to import your CSV file that contains your tax rates with effective start dates and end dates for specific tax profiles and regions.

   

   You can download a sample CSV file and use it for reference. This file contains sample records that you can replace with your own records. The data needs to be added to the sheet in the same format as the sample data. Refer to this table for details on each column/field on the CSV file.

4. In the next step, configure your preferences on how Chargebee will perform certain actions when the Bulk Operation is underway. Click Continue to validate your CSV file.

   

5. The data in your CSV file gets validated and the time taken depends on the file size. If there are any errors in the file, they will be listed on the screen during validation. These errors are also displayed on the csv file against the affected cells. The data in rows without any errors are validated successfully. You can download the file, update it to fix the errors and upload it once again. Once the validation is completed successfully, you will be notified through email. You can then come back and resume operation.

   

6. Click Create Taxes. Chargebee will process and import your file and update tax rates for applicable regions based on your file data.

7. Once the import is successful, you will be notified on the number of countries for which tax rate was imported successfully.

   

   Click View Taxes and you will be redirected to the Configure Taxes page where you can verify the newly imported tax rates.

You can configure other tax settings such as:

• Adding GST number for specific states
• Registering your VAT MOSS number
• Adding VAT number or relevant tax registration number for required regions
• Enabling Location Validation
• Configuring third-party tax providers for specific regions
• Other country-specific configurations

Exporting Taxes in Bulk 

You can view all the configured taxes for various regions/profiles, and their effective time periods by exporting a file. To export tax rates file on your Chargebee site, follow these steps:

1. Click Settings > Configure Chargebee > Taxes > Bulk Management of Taxes > Export Taxes.

2. You will be redirected to the Export Data page, where you can select the region for which you can export the tax file. You can select from the following options:

   
   • European Union
   • United States and Canada
   • Rest of the world

3. Click Export.

Your export operation will be initiated and once complete, the file will be downloaded automatically.

You can also download the file from under Export History for 14 days from when the export operation is executed.

Transitional Taxation 

Tax rates such as VAT or GST are bound to change anytime around the year, and it is critical to stay on top of transitional taxation rules to ensure that your customers are taxed accurately, and that your Chargebee invoices reflect the same. By default, Chargebee calculates taxes based on the invoice date. Any change in the tax rates during this service period would require you to update the tax settings on your Chargebee site manually. You would then generate a credit note for the remaining service period and raise a one-time charge with the remaining amount and the new tax rate. The new tax rates will be automatically applied for the upcoming renewals.

The Transitional taxation feature in Chargebee allows you to stay compliant with transitional taxation rules by automatically applying any tax rate changes during the invoice service period and even capturing them clearly on your invoices, and credit notes. You can upload the tax rate changes for multiple regions and periods via the Bulk Management of Taxes & Scheduling Tax Rates feature.

When an invoice spans a service period with different tax rates, different taxes are applied for relevant periods. Multiple tax line items with former and revised tax rates are displayed on the invoices to reflect how taxes are applied accurately for the entire period. Invoices raised for usage based billing use the same logic.

Let's look at an example and consider the increase in VAT rates effective from January 1, 2024 by the Swiss Federal Tax Administration. As per their guidelines services rendered by 31 December 2023 are subject to the current rates while the new rates will apply to supplies rendered as from 1 January 2024. With transitional taxation feature enabled for Switzerland and the corresponding tax changes scheduled in Chargebee, an invoice raised for services from December 15th, 2023 to January 15th, 2024 will have different tax rates applied accurately for the following periods:

• VAT @ 7.7% (Dec 15 - Dec 31, 2023)
• VAT @ 8.1% (Jan 01 to Jan 15, 2024)
  

Configuring Transitional Taxation 

To enable transitional taxation setting in your Chargebee site, follow these steps:

1. Click Settings > Configure Chargebee > Taxes > select the region for which you are configuring transition taxation.
2. On the Taxes page, click the toggle to enable the transitional taxation setting under Transitional Taxation.
   

You have successfully enabled the transitional taxation setting for your Chargebee site. Invoices of the corresponding region that span service periods with multiple tax rates will now have multiple applicable tax rates applied automatically.

Tax Amount Withheld 

Tax Amount Withheld or Tax Deducted as Source (TDS) is a direct taxation mechanism that was introduced to collect any applicable tax at the source of payment transactions, by the buyer. As per the Tax Amount Withheld, when a buyer(deductor) is liable to make a payment to the seller(deductee), the buyer deducts tax at the source and transfers the balance to the deductee. The buyer withholds a certain part of the total amount to be paid to the seller and pays it directly to the government as taxes.

Let's look at an example. Acme Inc makes a payment of USD 20,000 towards professional fees to ABC Corp. and the applicable tax rate is 10%. Acme withholds the tax of USD 2,000 and makes a net payment of USD 18,000 to ABC Corp. Acme Inc. directly deposits the amount of USD 2,000 to the credit of the government.

Based on your business requirements and tax compliance rules in your country, you can record tax withheld in Chargebee by specifying the amount withheld, for offline payments.

Configuring Tax Amount Withheld 

To allow recording the tax amount withheld in your Chargebee site, follow these steps:

1. Click Settings > Configure Chargebee > Taxes.

2. Enable the setting Record Tax Amount Withheld by Customers for offline payments.

   

3. Click Save.

After the setting is enabled, users can start recording the tax amount withheld for all offline payments on your Chargebee site.

When the setting to allow recording tax amount withheld is disabled, users will not be able to record the taxes withheld for any invoices (generated before/after disabling) going forward. Users can remove an existing tax withheld line item from an invoice record, however, users cannot add the tax amount withheld again, even for the same invoice.

Recording Tax Amount Withheld 

To record the tax amount withheld for an invoice, follow these steps:

1. Click Customers/Subscriptions and select the customer/subscription record for which you are recording TDS.

2. Click open the associated Payment Due/Not Paid invoice.

3. Click the more icon, select Record Tax Amount Withheld and specify the amount. You can specify an amount that is equal to or lesser than the amount that is due as per the invoice, at the time of recording the TDS.

   

4. Optionally, edit the note that gets displayed for the amount withheld on the respective invoice PDF.

   

5. Click Proceed.

The tax amount withheld is successfully recorded for the invoice.

You cannot modify the tax amount withheld for the invoice. However, you can remove the tax withheld and add it again as required.

The invoice PDF displays a note on the tax withheld.

Issuing Credit Notes on Invoices with Taxes Withheld 

You can create credit notes from invoices with tax amounts withheld.

While creating refundable credit notes or refunds for an invoice that contains taxes withheld, the amount specified for credit cannot exceed the sum of the invoice amount, taxes withheld, and credits from any previous credit notes.

Configuring Reverse Charge 

Reverse charge is a tax mechanism where the liability to pay taxes falls upon your customer - the buyer of your products or services, and not on you - the supplier. The reverse charge mechanism is applicable in various countries and based on your requirements, you can configure to collect reverse charges from customers in specific countries.

Chargebee applies the reverse charge mechanism only when:

• The customer is from a country that is different from the country specified in your organization address.
• The customer is from a country you have configured to collect reverse charges.

To apply reverse charge for customers of specific countries in your Chargebee site, follow these steps:

1. Click Settings > Configure Chargebee > Taxes.

2. On the Configure Taxes page, click Add Region and select the country from the drop-down list.

3. Enable the setting Reverse Charge.

   

4. You can also enable the setting to Show note on reverse charge to display a note on invoices when reverse charge is applied. The Reverse charge note is a common feature applicable for both Chargebee taxes and third-party taxes.

   • Click Edit Note to modify the default note message for reverse charge.

     

   • On the Edit Reverse Charge Note popup, type your new message and click Update.

You have successfully enabled the setting to apply reverse charges for the country.

When a subscription is created for a customer from a different country than your organization address for which you have configured to collect reverse charge, tax is not applied on the invoice, and the Reverse Charge note gets displayed.

Collecting Tax Registration Number for countries not configured for tax 

If a customer's country is not in the Tax Jurisdiction list that are configured in your Chargebee site, you can still collect their Tax Registration number via UI, API, or a checkout field.

To enable this setting, click Settings > Configure Chargebee > Billing LogIQ > Billing & Invoices > Collect Tax Registration Number from customers for countries not configured for tax > and enable the setting.

FAQs 

• How is tax calculated for physical and digital services when shipping and billing addresses are provided?

EU and New Zealand - If you are selling physical goods, Chargebee will consider Shipping Address Country for tax calculation. If Shipping Address is not present, then Billing Address Country will be considered.

If you are selling Digital products/services, Chargebee will consider only Billing Address Country for tax calculation.

For rest of the countries, Chargebee considers Shipping Address Country and then Billing Address'.

• Is the Tax profile setup mandatory?

No, you don't need to create multiple Tax Profiles. Chargebee will create a First Profile (named ‘Primary') automatically.

• Who will use multiple Tax Profiles?

You will! If you are selling different products in the same/multiple countries at different rates, the Tax Profiles feature will help you setup different profiles for each product/region, so you can apply different tax rates with ease.

• What if a particular product is sold both in digital and physical format?

At the moment, you can only map one product to one profile (either digital or physical). If you are selling the same product in digital and physical format, you will have to create two different products in Chargebee so you can map them to two different profiles.

• What happens to old invoices when I delete a tax region?

If you make any changes to your tax configuration it will affect all the invoices that are created from that point onward. Your past invoices will not be modified to reflect the changes that you make to your tax configuration - this includes deleting a region.