Getting Started

Product Catalog

Customers

Subscriptions

Invoices, Credit Notes and Quotes

Taxes

Payments

Site Configuration

Data Privacy & Security

Data Operations

Reports and Analytics

Integrations

Configuring Taxes 

In Chargebee, taxes are applied whenever an invoice is generated for either a subscription, renewal or a one-time charge.

Sales/Service Taxes are applied based on the configuration provided as part of the tax settings. The configuration of taxes in Chargebee is provided at a product/service level. Country specific taxes are also configured at this level.

If you want to price your plans/addons in fractional amounts or if you want to charge for fractional quantities, you can enable multi-decimal support in your Chargebee site. When this feature is enabled, the multiple decimal places of your plan/addon price and quantities are considered in their entirety for invoice amount and tax computation.

The invoice line item amounts and tax amounts are however rounded off to their currency precision. Learn more about the rounding logic for line item amounts.

Chargebee allows you to generate tax reports. Read Tax Reports to know more.

Note

Taxes will be applied to invoices only if you have configured taxes in Chargebee. Remember to configure taxes for every region you have customers in.

Here's a list of steps to be performed to setup your Tax settings in Chargebee:

Part 1: I'm selling products which are subject to a single tax rates in a taxable country 

Step 1: Provide your Organization Address 

You should provide the Organization address where you are based out of. Navigate to the Tax Settings page in your Chargebee site(Settings > Configure Chargebee > Business Profile) and click Add Address.

This is a mandatory step. You will not be able to enable taxes in your Chargebee site without providing an Organization Address. Chargebee requires this information to calculate your tax liability.

Step 2: Enable Tax 

Navigate to Settings > Configure Chargebee > Taxes and click Configure Tax.

Step 3: Set Price Type 

The price that you quote for your Product or Service or add-on can be either:

  • Inclusive of tax, where tax is included in the 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 illustration of how Price Types work:

Product name Unit Price Currency Price Type Sample Tax Rate
Basic Plan_usd 100 USD Exclusive 5%
Professional Plan_usd 150 USD Exclusive 5%

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.

Product name Unit Price Currency Price Type Sample Tax Rate
Basic Plan_eur 80 GBP Inclusive 20%
Professional Plan_eur 120 EUR Inclusive 20%

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.

Tax Exclusive Tax inclusive
If you set the Price Type to Tax Exclusive, the tax will be calculated on the charge and added to the charge to arrive at the total payable amount.

Total Charge - $100
Tax applicable is 5%.
In this case, $5
Total amount is $105 (100+5).
If you set the Price Type to Tax Inclusive, the tax you configure will be included as part of the charge. The tax amount will be derived from the charge. That is, the tax amount will be derived from the total charge and displayed on the invoice.

When discounts are not applied

Total Charge - £100
Tax included is 20%.

The tax break-up will be:
Unit Price - £83.33
Tax - £16.67
Total amount stays at £100

When a discount is applied

Total Charge - $155
Discount applied - $50
Taxable amount - $105
Tax applied is 5%. In this case, $5

The tax break-up will be:
Charge - $100
Tax - $5
Note
  • If a customer is enabled for tax exemption, the tax amount will be deducted from the total charge while invoicing. Discounts, if any, are applied before the tax is added. Refer to the Customers page to see how to exempt a customer from tax payment.

  • If the product/addon is marked as exempted from tax, the charge provided will be treated as exclusive of tax. Discounts, if any, will be applied on this amount. Refer to the Plans page to see how to mark a plan as non taxable.

Step 3a: Set 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.

Example:

You are based in the US, selling a digital product at a price of 100 USD. Imagine you have customers in India and New Zealand too. India, like the US, allows invoices to display an inclusive tax rate but New Zealand tax regulation calls for invoices to display a tax exclusive price.
You want your prices to be inclusive of tax in the US and India and your prices to be exclusive of tax in New Zealand.

How you should configure price types in Chargebee: Set your USD (currency) price type as Tax Inclusive. Set New Zealand (Region) to Tax Exclusive.

Here's what your US, India and New Zealand invoices would look like:

Price of your product: 100 USD
Price for US customers: 100 USD (USD is tax inclusive)

If you set India to ‘Tax Inclusive'
Price for Indian customers: 100 USD (India is tax inclusive)

If you set New Zealand to ‘Tax Exclusive':
Tax in New Zealand: 15%
Tax you need to charge your New Zealand customers: $15
Price for New Zealand customers: 86.95 USD + 13.05 USD (New Zealand is tax exclusive)

Note

You cannot make use of the consistent pricing feature (see next step) if you set a different price type for a currency you are using and a different price type for a country you are selling in.

Step 3b. Setup Consistent Pricing (for Tax inclusive) 

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

To enable consistent pricing option, 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 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:

    • Reduce the price for non-configured regions by removing the tax included: Select this option if you are selling products in a region where you do not need to collect tax (say, from 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
    • In case of exemptions, 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. Let's consider the followng example:
      • Price when sold to a regular customer, including 10% tax (Tax included of Australia)= $100.
      • Price when sold to a tax exempted customer in Brazil (if the option is not enabled) - $83.33 removing 20% destination tax of Brazil.
      • Price when sold to a tax exempted customer in Brazil (if this option is enabled) - $90.91 removing 10% included tax.
  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.

Note
  • The Avalara inclusive pricing support is currently in beta testing. Kindly contact [email protected] if you wish to enable this feature in your Chargebee site.
  • The price type should be set as inclusive, for consistent pricing to be applied. This condition applies even for regions where Avalara is configured for tax calculation.
  • If the price type is set as exclusive, then the consistent pricing does not work and tax is applied on top of the catalog price based on tax region rates. If country is not specified under Tax included tax is that of option, then the included tax rate is considered as 0%.

Step 4: Add Regions 

Now you can start adding regions where you have registered and are liable to collect tax.

Click on the Add Region option to select a country

Once you have added the countries, you can start configuring the tax rates for each country.

Step 4a. Configure Tax details per country - Capture Registration Number 

For each country being added, you can provide the TAX Registration number as part of the configuration. Refer to Capture Tax Registeration Number section for more.

Step 4b: Configure Tax Rates 

You can add tax rates as required for the country where Taxes should be applied.

In case multiple Tax rates are to applied, you can do so as well. Click Add Tax Manually option to add your tax rates.

Provide the Tax Rates applicable and the label/text you want to see on the invoice:

Once, the rates are provided, Chargebee will show you a summary of the rates you have configured and provide the options edit, delete or clear all the tax rates, if the need arises.

Step 5. Configure Product/Service level Tax Settings 

If you've configured a tax type in your Tax Settings, by default all your products are taxable. If certain products in your site are not taxable, change your settings in Chargebee:

  • Via the web interface:

    Disable the This Plan/Addon is subject to taxes option as shown:

  • Via API:

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

PART II: SETUP MULTIPLE TAX PROFILES 

I'm selling products which are subject to different tax rates in the same taxable country: Setting up multiple tax profiles 

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

If you are selling 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 (like digital and physical goods for example), and require different tax rates to be applied to different products, in the same country, then 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 UK
  • ‘Solar Panel installation services' - 5% Tax in UK

This section will walk you through how to create two tax profiles in Chargebee using the ABC Solar use-case.

Step 1: Configure Multiple Tax Profiles 

Step 2: Name the Tax profile (to match the product category you will map this with) 

Once the required Tax profiles are added, you can view the profiles in the Taxable regions added. Since ABC Solar has to apply the EU's tax rates, here's the EU tax page:

You can provide the rates for each profile, as per the sample taken,

  • Profile 1: 20% Tax applicable for sales of ‘Solar Monthly Digest' (online magazine)
  • Profile 2: 5% Tax applicable for sales of ‘Solar Panel installation services'

Finally, you can map the Tax profile to the particular product or products it concerns.

Step 3: Map a Profile to a Product/Add-on 

Once a profile is created, you can map the profile to the appropriate Products/Services.

Note

If you create only one profile, it will be automatically mapped to your product catalog. In case you have enabled more than one profile, the DEFAULT profile will be mapped to all products. You can edit a different Tax profile and save. Based on the tax settings saved, the tax rate will be applied for the subscription.

Capture Tax Registration Number 

You can enable/disable Tax Registration Number to be captured (from your customers) as a common site setting as shown here:

You can also enable/disable the option to capture the Tax Registration Number in the Tax Settings page:

Additionally, you can choose to enable/disable the Tax Registration Number for specific countries:

If a country specific setting is set up, it will take highest precedence.

Next, select the ‘Label' which should be displayed in the invoice as per regulation (Tax Registration Number, VAT, ABN) and enter your Tax Registration Number.

For other countries not configured in the Tax Jurisdiction list, Chargebee will display Tax Registration number or the label you have provided in Text configuration settings for Hosted pages.

Via API

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

[see also]

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Delete Tax Profiles 

Chargebee gives you the option to delete tax profiles. To delete an existing tax profile, navigate to Settings > Configure Chargebee > Taxes. Here you will find the existing tax profiles and the option to delete them.

When a tax profile is deleted, it gets removed from every associated taxable region/country.
As far as the existing invoices are concerned, the tax rates that were applied will not be changed.

Note
  • Primary (Default) Tax Profile cannot be deleted.
  • A tax profile linked to a Plan/Add-on cannot be deleted.
  • If you want to remove tax profile linked to Plan/Add-on, the said Plan/Add-on need to be linked to another tax profile or it should be made tax exempt.

FAQ 

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

EU & 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.

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