VAT and VAT rates can be scary, but it’s vital you get it right. We’ve already covered the basics of VAT and how compliance doesn’t need to be complicated in our recent blog. But there are more VAT rules you might need to deal with.
Unfortunately, there isn’t one simple VAT rate for everyone and every product.
The different VAT rates – and what they mean for eCommerce businesses
This is the standard VAT rate, and is applicable to most products you might be selling online.However, there are some exceptions. In fact, there are all kinds of exceptions, depending on what type of business you are, who you are selling to, and various other little rules.
But there are some main exceptions that could affect you, such as if you sell children’s clothing or food and drink. These types of product are completely exempt from VAT, so you shouldn’t be including any VAT rates on them. Books, newspapers and magazines are all 0% too (but not e-books!).
If you sell smoking cessation products, energy saving materials, or children’s car seats & carrycots, these all have a reduced VAT rate of 5%, rather than the standard 20%.
The confusion – and the challenge – arises when you’re selling to different countries in the EU, because they all set their VAT rates differently. In Austria for example, books and foodstuffs have a rate of 10%, and are not exempt like in the UK. In France, newspapers are set at 2.1%, whilst most food and drink is at 5.5%.
In Germany, the standard VAT rate is 19%, but in Ireland it’s 23%.
It’s easy to get lost and potentially set the wrong VAT rate, for the wrong item, when you’re selling to customers from multiple countries.
How to set different VAT rates for multichannel selling
Once you have set up your VAT registration details for each country you’re selling in, you’ll see that each product in your inventory has a dropdown box for every VAT number. It’s always set to the standard VAT rate for each country.All you need to do is select the dropdown box and choose which reduced rate is applicable for each product, in each country.
For children’s car seats as an example, if you were selling in both the UK and in Ireland, you would select 5% for your GB VAT rate, and 13.5% for your IE rate.
When you’ve done this once, this VAT rate will always apply to the product, based on where the buyer is. You don’t need to worry about calculating the correct VAT for every single order you make.
It saves a lot of time, ensures your invoicing is accurate, and generally takes away a lot of the stress and hassle for you.
Use ChannelGrabber to make VAT transactions simpler
Remember, there are various rules about when you need to become VAT Registered – depending on your sales figures and where you hold stock. So always check if you do actually need to be dealing with VAT or not.But if you are VAT registered, don’t worry. Using effective multichannel eCommerce software like ChannelGrabber can help ensure all your transactions are simple, smooth and VAT compliant.
Sign up today if you don’t yet have a ChannelGrabber account, or learn more about setting up VAT here.