In Chargebee, taxes are applied whenever an invoice is generated for either a subscription, renewal or a one-time charge.
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.
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.
Chargebee allows you to generate tax reports. Read Tax Reports to know more.
Here's a list of steps to be performed to setup your Tax settings in Chargebee:
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.
Navigate to Settings > Configure Chargebee > Taxes and click Configure Tax.
The price that you quote for your Product or Service or add-on can be either:
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|
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|
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
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.
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.
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)
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.
If you have a global customer base, and would want to charge all the customers, the same price, use 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.
Select this option if you are selling products in a region where you do not need to collect tax (say, from UK to Mexico), but want to maintain your consistent price.
Price in EU - £99 inclusive of 10% tax
Price in Mexico - £99 with no tax included
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 calculate this based on your location of business (as opposed to the customer's location), enable this option.
Price when sold to a regular customer - £99 inclusive of 10% tax
Price when sold to a Tax exempted customer - £99 inclusive of 10% tax (if this option is not enabled)
Price when sold to a Tax exempted customer - £99 inclusive of 10% tax (if this option is enabled)
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.
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.
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.
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:
While creating/editing a plan, set the taxable parameter as false to mark a product 'non-taxable'.
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:
This section will walk you through how to create two tax profiles in Chargebee using the ABC Solar use-case.
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,
Finally, you can map the Tax profile to the particular product or products it concerns.
Once a profile is created, you can map the profile to the appropriate Products/Services.
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.
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.
You can send the VAT Number via the vat_number field via the following APIs:
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.
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'.
No, you don't need to create multiple TAX Profiles. Chargebee will create a First Profile (named ‘Primary') automatically.
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.
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.
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.