Recommended Tax Configuration for EU Stores (Magento CE 1.8 and EE 1.13)
Table of Contents
- Recommended Tax Configuration Settings for EU Stores
- Detailed EU Example Configuration: Sales in France and Germany with VAT
- For More Information
Note: This article provides information about how to set up tax calculations in Magento Community Edition (CE) and Enterprise Edition (EE). The information is based on CE 1.8 and EE 1.13; some options here might not apply to earlier versions.
Important: No guarantee is offered with respect to any of the information given here. Please contact an expert before you take any decisions about tax matters.
This article walks you through an example setup for a store based in France that sells > 100k Euros in France and > 100k Euros in Germany.
Note: If you have stores that operate in many states or countries, or if you have revenues exceeding approximately $2M per year, we recommend that you use a third-party tax provider because there can be a considerable number of tax rules and tax zones to manage.
This article assumes that you are familiar with general tax settings in Magento. For detailed instructions on how to set up general tax calculations, see Understanding How to Set Up Taxes in Magento CE 1.8 and EE 1.13 (Four-Part Series).
Recommended Tax Configuration Settings for EU Stores
Notes for this example:
- Tax calculations are managed at the website level.
- Currency conversion and tax display options are controlled individually at the store view level (you click the checkbox and override the website default).
- By setting the default tax country you can dynamically show the right tax for the appropriate jurisdiction.
- You might need to edit the catalog and ensure that it shows up in the right category/website/store view.
- You need to add an appropriate FPT attribute for each country/region where FPT applies to appropriate catalog items. For more information about FPT, see Setting Up a Fixed Product Tax (FPT) in Magento CE 1.8 and EE 1.13.
- Flush caches to see your changes.
Detailed EU Example Configuration: Sales in France and Germany with VAT
Step 1: Create Three New Product Tax Classes
Sales > Tax > Product Classes
- Create a VAT-Standard product tax class.
- Create a VAT-Reduced product tax class.
- Create a VAT-Free product tax class.
Note: This example assumes no need for multiple VAT-Reduced product tax classes.
Step 2: Create New Tax Rates for France and Germany
Sales > Tax > Manage Tax Zones & Rates
Create new tax rates with the settings shown in the following table.
|New Tax Rate||Settings|
Step 3: Manage Tax Rules for the New Rates
Sales > Tax > Manage Tax Rules
Create new tax rules with the settings shown in the following table.
|New Tax Rule||Settings|
Step 4: Set Up a Store View for Germany
- In the Admin panel in the upper left, click the Manage Stores link.
- Create a store view for Germany under the default website.
- Go back to System > Configuration, and in the Default Config box, choose the French store.
- In the General section, click to expand Countries Options and set the default country to France with appropriate locale options.
- To switch to the German website as the current configuration scope, go to System > Configuration > General.
- Click to expand Countries Options and set the default country to Germany, and change locale options as appropriate for the language.
Step 5: Configure General Tax Settings for France
System > Configuration > Sales > Tax
Configure general tax settings as shown in the following table.
|Tax Settings||Recommended Options|
|Tax Class for Shipping||Shipping (shipping is taxed)|
|Tax Calculation Method Based On||Total|
|Tax Calculation Based On||Shipping Address|
|Catalog Prices||Including Tax|
|Shipping Prices||Including Tax|
|Apply Customer Tax||After Discount|
|Apply Discount on Prices||Including Tax|
|Apply Tax On||Custom Price if available|
|Default Postal Code||* (asterisk)|
|Include Tax in Grand Total||Yes|
|All FPT Display Settings||Including FPT and FPT description|
|Apply Discounts to FPT||No|
|Apply Tax to FPT||Yes|
|Include FPT in Subtotal||Yes|
Note: FPT is included for relevant goods as a product attribute. For more information, see Setting Up a Fixed Product Tax (FPT) in Magento CE 1.8 and EE 1.13.
Step 6: Configure Settings for Germany
System > Configuration > Sales > Tax
- Use the Current Configuration Scope picker in the upper left to select the German store.
- Click to expand the Default Tax Destination Calculation section.
- Override the Default Country setting and set it to Germany.
- Override the Default State setting and set it to *
- Override the Default Post Code setting and set it to *
For More Information
- For an overview of the tax setup process, and links to articles that detail all the steps in the process, see Understanding How to Set Up Taxes in Magento CE 1.8 and EE 1.13 (Four-Part Series).
- Related tax articles:
- For more information about tax updates for the Magento CE 1.8 and EE 1.13 release, see Magento CE 1.8 and EE 1.13: Recommended Tax Configurations and Best Practices.