You can override the normal Value Added Tax (VAT) rates depending on region of your customer. VAT rates in eCom affect products, payments and shipping methods. Make sure you consider these points, depending on the location of your eCom store and your customers:
- Inside the EU: You may decide to create overrides to adjust the rates for other countries inside the EU or to charge tax for customers from other countries. This may be necessary when your turnover is higher than the threshold value of another country.
- Outside EU: You can create overrides to charge tax for customers from other countries. For example, you may be from Australia, the UK, Switzerland, Mexico, etc.
- Canada or the United States: You have different tax features. Override instructions for your region are available in Enabling taxes - USA or Canada.
- Have at least one tax rate setup.
- In the eCom admin, select Settings.
- Select Taxes located in the Payment Settings column.
- Select Edit beside tax rate you want to override.
- Select Add Regional Tax Rate.
- Configure the override:
- Country – Select the country that requires taxes.
- Region - Optionally select a region.
NOTE: You only need to modify this option when a province/state tax differs from the country's tax.
- Tax name – Enter a name that the override applies to, such as VAT.
- Tax rate - Enter the applicable tax rate for the country that the threshold value has been reached for.
- Tax type - Select either Combine with the federal tax or Replace federal tax.
- Click Save to add the tax override. The tax rate that you configured will now be applied to all new orders from that region.
To determine whether you are required to charge taxes for customers outside your eCom store's home country, you should use threshold values. You can determine the threshold value of a country by contacting a country's tax authority. They specify the threshold when you must charge the VAT rate for that country.
For example, you must charge a country's VAT rate when yearly sales exceed a country's threshold value for orders from:
- Customers or entrepreneurs who do not declare taxes
- Organizations that are not legally classified as entrepreneurs