Understanding the different VAT Rates to make transactions easier

June 3, 2018

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There’s no denying the fact that VAT rules can be complicated for anyone, let alone for eCommerce business owners who have a huge number of tasks to deal with and problems to overcome on a daily basis.

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

When most of us think about value added tax, especially here in the UK, the figure that comes to mind is 20%.

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. This is because they all set their VAT rates differently. For example, in Austria, books and foodstuffs have a rate of 10%, and are not exempt like in the UK. However, in France, newspapers are 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%.

You can easily lose focus and potentially set the wrong VAT rate for the wrong item, especially when you’re selling to customers from multiple countries.

How to set different VAT rates for multichannel selling

But with the right software, it can be a lot easier. That’s where ChannelGrabber can help.

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. By default, the standard VAT rate for each country is good to go. All you need to do is select the dropdown box and choose which reduced rate is applicable for each product, in each country.

Let’s use 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. Besides ensuring your invoicing is accurate, it generally takes away a lot of the stress and hassle for you.

Use ChannelGrabber to make VAT transactions simpler

Many eCommerce businesses who sell on multiple channels in multiple countries find VAT a big challenge. But it really doesn’t need to be.

Remember, there are various rules about when you need to become VAT Registered. One of which depends on your sales figures and where you hold stock. So always check if you do actually need to be dealing with VAT or not. However, if have a VAT registration, 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.

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