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.
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.
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 (Settings > Taxes) inside the app and click the Add Address option.
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.
Click the Enable Tax Option.
The price that you quote for your Product or Service or addon 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 |
|---|---|---|---|---|
| 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 |
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.
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.
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 set a price type for the currency you are selling in: Click the Manage Price Type Option on the taxes page.
To set a price type for a region you are selling in: Find the Your checkout prices are box in the particular region's configuration page and click the Manage option.
Here's an example:
You are based in the US, selling digital products. Imagine you have customers in US and EU.
This is how you can go about configuring the details in Tax Settings:
Catalog Price Settings
These prices are set when you when you create a plan. Your catalog prices are set to inclusive or exclusive when you configure a price type for your currency at Settings > Taxes.
Setting the price type for the currency that you are selling in:
| Catalog Price Type | Catalog Price |
|---|---|
| Tax Inclusive (10%) | Pro Plan - $110 |
Checkout Price Settings
Additionally, you can set the price type for the regions where you are selling:
| Tax Jurisdiction Region | Region Price Type |
|---|---|
| US | Tax Exclusive |
| EU | Tax Inclusive |
Chargebee will calculate tax applicable to invoices factoring these settings in. Consider two invoices, the first sent out to a US customer and the second sent out to an EU customer:
Invoice 1: Sale to a US Customer (the taxes will be displayed separately)
| Item | Price |
|---|---|
| Pro Plan | $100 |
| Tax | $10 |
| Total | $110 |
Invoice 2: Sale to an EU customer
| Item | Price |
|---|---|
| Pro Plan | $110 |
| Total | $110 |
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.
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 price consistently, this option is for you.
Price in EU - £110 inclusive of 10% tax
Price in Mexico - £110 with no tax included
Select this option if you would like to make use of the consistent pricing feature while reducing the cost of added tax for regions where you have no configured taxes.
Price in EU - £110 inclusive of 10% tax
Price in Brazil (non-configured region) - £110 (-) 10% tax = £100
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 deduct the tax based on the tax rules of your location of business (as opposed to the customer's location), enable this option.
If you are based in the UK and selling to a tax exempted customer in France, this option will allow you to deduct tax based on UK tax rates, rather than France's tax rates.
Price when sold to a regular customer (UK) - £110 inclusive of 10% tax
Price when sold to a Tax exempted customer (France) - £90 (after deducting UK's 10% tax)
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.
How to configure:
US Sales Tax
Canada Sales Tax
EU VAT
Australia GST
New Zealand GST
Tax in Other countries
For each country being added, you can provide the TAX Registration number as part of the configuration.
Select the ‘Label' which should be displayed in the invoice as per regulation (example: Tax Registration Number, VAT, or ABN) and enter your Tax Registration Number.
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:
Via API: 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.
You can provide different rates for each profile within the EU:
Here's what ABC Solar's EU Tax page would look like:
Once a profile is created, you can map the profile to the appropriate Products/Services. Once mapped, you can configure specific tax rates for a product in a particular region.
If you create only one profile, it will be automatically mapped to your product catalog.
Chargebee gives you the option to delete tax profiles. To delete an existing tax profile, navigate to Settings > Site Settings > Taxes > Manage Tax Profiles. 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.
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.
You don't have to. Your existing Tax settings will continue to apply.
Any time you want. Just send a mail to support@chargebee.com and we will enable Tax profiles in your Chargebee site. Check out the pricing page to see if the upgrade is the right choice for you.
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.
