Overview
Navigating the complex European Union VAT rules for your online business can be a hard task. plug&paid and our e-commerce shopping cart offers an extensive array of tools to assist businesses alleviate some of the burden.
All plug&paid account holders can enable EU VAT rules for all their shopping carts automatically with just one click. Depending on the country, product category and region, prices in the shopping cart will dynamically adjust according to the correct VAT rate.
These features are meant to help sellers automate some parts of the complex EU VAT system during the checkout process and should not be used as an accounting system for businesses. Please make sure to consult a VAT expert for further advise and/or use the manual VAT option if you are unsure.
For sellers based in the European Union, the prerequisite to enable the EU VAT rules, is adding a VAT number in your settings page under the Profile Information section. By enabling the EU VAT rules we will automatically apply them to all your shopping cart(s) so make sure to update your product prices to not include any VAT before enabling this feature.
What is included:
- Digital Products/Digital Services/Subscriptions: VAT is calculated according the buyer's billing country.
- Reduced Rates: Country based reduced VAT rates for special product categories and services.
- B2B VAT Number Validation: Your buyers will be able to enter their VAT numbers when buying your products and plug&paid will attempt to verify them with the European Union VIES database. If a valid number is provided all previously applied VAT charges will be deducated.
- EU VAT Invoices
- 19 Languages: Our checkout cart is available in 19 languages including all major European languages from German to Czech.
Physical Products - EU Based Sellers
- B2C (Business-to-consumer) within the EU: VAT charged where the business (seller) is based.
- B2B (Business-to-business) in the same EU country: VAT charged where the business (seller) is based. If a valid VAT is provided the VAT charge will not be deducted.
- B2B (Business-to-business) in another EU country: No VAT charged if the buyer provides a valid VAT number in the checkout process.
- B2B/B2C outside the EU: No VAT charged.
plug&paid will automatically apply VAT rates on your product prices (rounded). The rate will be reflected in the invoices and purchase confirmation emails. This rate depends on your account's country of registration, your customer's location and product category.
Standard VAT: Standard VAT rates apply for the vast majority of products and plug&paid product categories. It is a fixed rate ranging from 17% - 27% depending on your registered country.
Reduced VAT: For specific types of products and services in the European Union, such as books and passenger transportation services, reduced VAT rates (0% - 14%) apply. plug&paid maintains an internal database of these categories and applies reduced rates on your product prices (rounded). Read the category list here
If you are an EU seller and fall into this category, then you can list your product in one of the specialised categories while creating them in the plug&paid dashboard, and plug&paid will apply the reduced rates in the cart for you.
No VAT: In some cases your customers will be able to deduct any VAT charges that were previously applied to their order:
- If your customer's billing address is outside the EU: EU sellers do not charge VAT for sales outside the European Union.
- If your customer is a business in another EU country and provided a valid VAT number: Your customers will be able to enter a VAT number in the billing section in your checkout cart and plug&paid will attempt to validate that VAT number via the Vatlayer API. If the VAT number is validated then VAT specific charges will be deducted from the order. Invoices will also display 0% VAT charged.
Once the EU VAT feature package is enabled in your account, there is no need to configure anything else.
Digital Products - EU Sellers
Products or services described as digital products, digital services, broadcasting and telecommunications have special VAT rules when purchased by consumers within the European Union. The seller must always charge VAT in the EU country where the billable customer resides according to the rules regarding Telecommunications, broadcasting & electronic services.
plug&paid automates this process for you and in the checkout cart the correct VAT % is calculated on the piece price and applied to the orders in accordance to the customer's billing address. To help you validate the location of your customers, plug&paid will display the customer's billing information and I.P address in each invoice as proof of a buyer's location (if a valid VAT is provided and validated otherwise it will be ignored).
VAT Registration
Sellers of these services (including plug&paid) fall under the Mini one-stop-shop (MOSS) Scheme (unless the customer is located in the same country as the seller where standard VAT rules apply). This scheme allows you to supply these types of services within the EU without the need to register in each EU country you supply to. Registration for the MOSS scheme might be applicable for your business in order to avoid legal headaches in the future or the need to register your business in every country you do business to. Consult a VAT expert for further advice if you are unsure.
EU VAT Number Validation - Digital & Physical Products
If you are selling products or services to businesses in another EU country with valid VAT number then 0% VAT must be charged. The customer must account for the tax using the reverse-charge mechanism. plug&paid can verify VAT numbers provided by your EU customers via our partnership with vatlayer.
In the billing information section of your checkout cart, the customer will have the option to enter a VAT number. That number will be validated via the API once hitting the next button (or language equivalent). Once your customer's VAT number is verified via our system, the order will be automatically updated and any VAT charges that were previously applied will be deducted.
Note: The VAT company validation feature is offered as a 3rd party add-on and plug&paid has no control over its data or its availability. If your business has only recently registered to your local VAT authority, it might take a few days or maybe more before the EU VIES databases are updated.
VAT Rates - Sellers based outside the EU:
For sellers based outside the European Union plug&paid offers:
- Digital Products/Services: VAT is calculated according the buyer's billing country.
- B2B VAT Number Validation: Your buyers will be able to enter their VAT numbers when buying your products and plug&paid will attempt to verify them with the European Union VIES database. If a valid number is provided all previously applied charges will be deducated.
How to enable it
To enable the EU VAT features go to your Settings page, choose Taxes and Fees and activate Automated European Union VAT.