Introduction
Value Added Tax (VAT) is a consumption tax on the value added to nearly all goods and services bought and sold in, and into the UK and European Union. It is charged as a percentage of the sale price; is applied at the point of sale, included on the invoice to the consumer (if applicable), and collected by the supplier.
There are specific tax rules that will determine the appropriate tax rates on orders. These rules can vary based on multiple factors, especially when handling import/export shipments; for instance where the customer is located or the country of origin for the goods being shipped, can impact if VAT applies.
When considering VAT charges, it isn't just when to apply charges, but also what type or percentage of VAT applies. Most countries have the following types of VAT %:
Low: this is usually 0%
Medium: e.g 5% for UK, 6% Belgium, 9% Netherlands
High: e.g. 21% for Belgium and Netherlands, 20% for the UK
Special rules: export (e.g. containers) doesn't need to pay VAT in certain countries
Keeping track of how and when to apply VAT can be complicated and time consuming. Automated calculations can help to improve invoice efficiencies and reduce potential errors when determining VAT rates.
VAT Configuration Defaults
Default Tax rates are configured at the time your tenant is created, and any modifications will typically be made as part of the initial onboarding.
To view available tax types:
Navigate to CONFIGURATION > Accounting
Scroll down to the Tax rates panel where a list of all the available tax rates will show.
In addition to the tax rates, it is possible to set a Base VAT rate, this is the rate that would typically apply unless one of the specific rules takes precedence.
Some accounting integrations (Business Central / Multivers / Adfinity), allow both the base rate and the specific tax rate that is applied to be exported.
VAT configuration on the Customer
When adding a customer in Qargo, completing the VAT section in the customer profile can help to automate the VAT calculation on orders where that customer profile is used.
VAT Number
A VAT registration number is a unique number that identifies a taxable business (or person) or non-taxable legal entity that is registered for VAT.
VAT numbers added to the customer profile should include the country code.
Tax Type
Co-contracting:
Intra EU (reverse charge): this should be used when your company and the customer are inside of the EU. It will show reverse VAT as description on the invoice.
No VAT:
You should use this if your company is based in the EU and the customer is based outside of the EU
If you are based in the UK and the customer is based outside of the UK, then you should select this option
Transit: Use if the delivery or pickup is outside of the EU.
VAT: if your customer is based in the same country as yourself
Refer to summary guide below for more details.
VAT exceptions toggle
When set ON, this will automatically apply the appropriate tax exceptions for import / export orders.
When set ON, the Tax type field is greyed out and cannot be modified.
VAT configuration on Rate Cards, Surcharges/Extras
When configuring Transport services and Surcharges / Extras the VAT for the sales invoice is mandatory.
Rate Cards that use any of the saved charges will include the VAT that was added to this charge.
Avoids having to configure the VAT % separately for each rate card
Applies to both transport charges and any surcharges or extras that are set up.
Most countries have the following types of VAT %:
Low: this is usually 0%
Medium: e.g 5% for UK, 6% Belgium, 9% Netherlands
High: e.g. 21% for Belgium and Netherlands, 20% for the UK
Special rules: export (e.g. containers) doesn't need to pay VAT in certain countries
VAT Calculations in Qargo
Summary
VAT Calculation Priority:
Customer VAT configuration takes precedence!
Determines the overall VAT treatment
Rate card VAT percentages
Only applied if customer is set to "VAT" type
When determining the VAT to be used for the order, the first step is to check the VAT configuration on the customer profile:
When saved in the customer profile, the VAT number will show at the top of the order.
It is important that this is configured correctly. Based on the configuration on customer, Qargo will apply the following logic:
Customer is Intra EU => VAT on order will be set to reverse charge. We will ignore any configuration on the rate card.
Customer is No VAT => VAT on order will be set to No VAT. We will ignore any configuration the rate card.
Customer is VAT => we will think look at the configuration the rate card to determine which VAT % that we should use.
Example: Customer VAT rate is set. Rate card for this order is set at 5%.
Rate card check: which % we should use.
Only do this if the customer falls under the VAT rules (Customer configuration is VAT)
If the customer falls under reverse charge or No VAT then won't apply
This is often not the only factor in considering the appropriate tax to apply, it can also be dependent on the goods; where they will be picked up and ultimately delivered.
📚 When building an order enter the consignment details country of origin.
Calculating Total VAT Amount on Invoice
When calculating VAT on an invoice, there are 2 calculation methods that can be set up in the CONFIGURATION > Accounting page. This is typically configured as part of the initial account configuration, and once set cannot be updated.
The 2 options available are:
Calculate VAT on invoice total. Sum all charge lines and VAT is applied to the total of all charges.
Sum VAT per charge line. VAT is calculated and rounded to 2 Decimals on each individual charge line.
📚Which option to select may be determined based on the accounting package used, as the rounding may impact matching how they calculate.
Once configured reach out to the Qargo Account Manager for any changes.
Automatically determine Tax
The system can automatically determine the appropriate tax type to apply to the order.
Set in the customer profile with the 'Apply VAT Exceptions for Import/Export' toggled to ON.
Tax type is then determined based on:
Country of the Customer, determined based on the VAT Number and the Billing Address.
Order Pickup and Delivery locations.
📚 The determination is based at the CUSTOMER level.
Updating the customer will recalculate the tax.
Changing the collection and delivery locations will not.
For Import / Export orders (containers) tax type is often determined based on the COUNTRY OF ORIGIN or COUNTRY OF DESTINATION of the goods, and not the collection or delivery locations.
Add this detail under the consignment information
Tax Type in Orders
When adding a charge to an order, if the 'Set VAT Automatically' toggle is set to ON, the VAT % rate will be greyed out and unavailable.
Tax exceptions will be shown, if applicable when adding a charge in the order.
Summary guide for VAT Rules, based on country of the tenant
BE tenant overview
Transport | BE customer | EU customer | Customer outside EU |
Domestic transport | VAT | Reverse charge (Art 44) | VAT |
Transport within EU | VAT | Reverse charge (Art 44) | No VAT |
Pickup outside EU, delivery inside EU | Transit ART 41 No VAT | Transit ART 41 No VAT | Transit ART 41 No VAT |
Pickup inside EU, delivery outside EU | No VAT | Transit ART 41 No VAT | Transit ART 41 No VAT |
Transport outside EU | No VAT | Reverse charge (Art 44) | No VAT |
EU tenant overview
Transport | Customer within same country as tenant | EU customer | Customer outside EU |
Domestic transport | VAT | Reverse charge (Art 44) | VAT |
Transport within EU | VAT | Reverse charge (Art 44) | No VAT |
Pickup outside EU, delivery inside EU | VAT | Reverse charge (Art 44) | No VAT |
Pickup inside EU, delivery outside EU | VAT | Reverse charge (Art 44) | No VAT |
Transport outside EU | No VAT | Reverse charge (Art 44) | No VAT |
UK tenant overview
Transport | UK customer | Customer outside UK |
Domestic transport | VAT | No VAT |
Pickup outside UK, delivery inside UK | No VAT (Transit) | No VAT |
Pickup inside UK, delivery outside UK | No VAT (Transit) | No VAT |
Transport outside UK | No VAT | No VAT |
IE tenant overview
Transport | Customer within same country as tenant | EU customer | Customer outside EU |
Domestic transport | VAT | Reverse charge (Art 44) | VAT |
Transport within EU | VAT | Reverse charge (Art 44) | VAT |
Pickup outside EU, delivery inside EU | No VAT (Transit) | Transit | Transit |
Pickup inside EU, delivery outside EU | No VAT (Transit) | Transit | Transit |
Transport outside EU | No VAT | Reverse charge (Art 44) | No VAT |