2.31 Simple but Essential: VAT Guidelines

2.31 Simple but Essential: VAT Guidelines

Introduction


Value-Added Tax or VAT is a tax on the consumption or use of goods and services levied at the point of sale. VAT is a form of indirect tax and is used in more than 180 countries around the world.

In this article we will help you set up your VAT configuration in the backend.


Steps

How to Configure VAT (Value Added Tax)

Step 1: Customer Tax Classes

 

  1. Go to your admin panel>Sales>Tax>Customer Tax Classes
  2. Ensure that there is a customer tax class that is appropriate to use with the VAT. For this example, ensure that there is a customer tax class named Retail Customer. If Retail Customer does not exist, click the Add New button and add it
  3. Enter the name of the Customer Tax Class and then click on Save Class

 

Step 2: Setup Product Tax Classes

  1. Go to your admin panel>Sales>Tax>Product Tax Classes
  2. Add New
  3. Enter the Class Name (i.g. KSA VAT)
  4. Save Class

 

Step 3: Setup Tax Zones and Rates

  1. Go to your admin panel>Sales>Tax>Manage Tax Zones & Rates
  2. Add New Tax Rate
  3. Enter the Tax Identifier (i.g. KSA VAT – 2018 Rate)
  4. Choose the country where this rate is applicable
  5. Choose the State (*=All States)
  6. Choose ZIP/Post Range If Yes: From/To – If No: enter ZIP/Post Code (*=All ZIP/Post)
  7. Enter the rate percent (5=5%)
  8. Choose the Tax Titles or leave empty to use the Tax Identifier (points #3)
  9. Save Rate

OB 2.31.1

vat.1

 

Step 4: Manage Tax Rules:

  1. Go to your admin pane “Sales” > “Tax” > “Manage Tax Rules”
  2. Add New Tax Rule
  3. Choose the Tax Rule Name (KSA VAT RULE 1)
  4. Choose the Customer Tax Class (i.g. Retail Customers)
  5. Choose the Product Tax Class (i.g. KSA VAT)
  6. Choose the Tax Rate (i.g. KSA VAT)
  7. Enter the Tax Rule Priority
  8. Tick Calculate off subtotal only if you want the Tax Rate to be calculated only on the subtotal
  9. Save Rule

OB 2.31.2

vat.2

Step 5: Apply Taxes on Products:

  1. Go to your admin panel “Catalog” > “Manage Products”.
  2. Choose the products you want to apply VAT on
  3. Go to Price tab
  4. From Tax Class, choose which Tax Class you want to assign for this product (i.g. KSA VAT)
  5. Save

OB 2.31.3

vat.3


Outcome

At the end of this article, you should be able to configure VAT


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