Setting Up EU VAT Rates for Digital Products

We’re not tax professionals so our advice is how to use our software. For specific advice when it comes to what or when to charge tax/VAT/GST etc, we recommend consulting with a tax professional or an accountant on what may be your best options.

Each business is unique, and there’s no way we can cover every possibility.

EU VAT laws for digital goods changed on 1 January 2015, affecting B2C transactions only. VAT on digital goods must be calculated based on customer location, and you’re required to collect evidence of this via an IP address and/or Billing Address.

This information is provided as-is in relation to this specific scenario. For general tax setup please see the Setting up Taxes in eCommerce documentation, along with Configuring Specific Tax Setups in eCommerce for how to configure eCommerce tax settings.

For more details and information about this, please see the European Commission Taxation and Customs Union website for VAT MOSS (mini One Stop Shop).

In addition, you need to set up VAT rates in your eCommerce store to charge the correct amount. This guide shows you how to set up rates specific to Digital Goods.

Setting Up Your Tax Classes #

If you’re only selling digital goods, VAT rates can be added under Standard Rates in eCommerce.

If you’re selling/distributing both digital and regular products, you can create and use a new tax class, for example, Digital Goods, and update them.

To set up EU VAT rates in a new tax class:

  1. Go to: eCommerce > Settings > Tax.
  2. Select the Additional Tax Classes setting.
  3. Add a new tax class to the list, for example, Digital Goods.
  4. Save.

Digital Goods tax class added via the Additional tax classes text input field

After saving the tax options changes, tax rates need to be assigned to this tax class.

Setting Up the EU VAT Rates #

The next step is to input the EU VAT Rates into eCommerce.

Look Up the Latest VAT Rates #

The latest VAT rates can be found at the Europa website in a PDF document. If these rates change, you need to update the VAT rates for your store.

Input Rates #

  1. Go to: eCommerce > Settings > Tax > Digital Goods (now a new tab after you created a new tax class).
  2. Enter rates for all EU member states.At the time of the last update, Standard VAT rates are:

Alternatively, if you have a CSV file in the correct format, you can import the VAT rates to save time. Here are the above rates in CSV format with tax class Digital Goods: vat_rates.csv

To import this file, select Import Rates on the tax input page, and an importer will appear.

eCommerce specific tax rate screen with no rates showing the Import CSV button

eCommerce tax rate import screen

Once rates have been uploaded, imported or input, in the tax rate screen you will see a table similar to this:

eCommerce specific tax rate screen with rates

With EU VAT rates set up, users buying a product with the Digital Goods tax class are charged tax based on their location, not the store location.

Assigning the Tax Class to Products #

To apply this tax class to digital products in eCommerce:

  1. Go to: Products > All Products.
  2. Edit a product.
  3. In the General section of the Product data, select the tax class created from the Tax Class dropdown.
  4. Update the product

eCommerce Product data area showing Tax status and Tax class

You can also bulk-edit products:

  1. Go to: Products > All Products.
  2. Tick the box to the left of each of the products you want to bulk-edit.
  3. Select Edit from the bulk actions dropdown.
  4. Apply.

Two products selected and the Bulk Actions dropdown with Edit selected

After clicking Apply the bulk edit view will appear:

  1. Choose the tax class from the Tax class dropdown.
  2. Click Update to apply the Tax class to the selected products.