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How to Configure Value Added Tax (VAT) in Magento 2

Configuring Value Added Tax (VAT) from Magento 2 backend is a great solution in order to solve the conflict of the different VAT calculations, namely the store is located at different regions and the type of goods you provide are products, materials, or services. With VAT functionality, you can create the data management table that contains your country, VAT rate, customer types, and so on.

Configuring VAT in Magento 2 allows you to comply with existing rules, manage your cost better, as well as become more professional. Therefore, today, I want to show you all steps to configure and apply the VAT quickly on your Magento 2 store.

Configure Value Added Tax (VAT) in Magento 2:

Configure Customer Tax Class

To establish a tax rule, you initially must incorporate a tax rate.

  • Access the Stores > Taxes > Tax Zones and Rates section on the Admin sidebar.

If you already possess a customer tax class for VAT, skip the following steps; otherwise:

  • Select Add New Tax Rate

  • Input the Tax Identifier

  • Put a tick on the Zip/Post is Range checkbox to specify the zip code range

  • Specify the applicable country for the tax

  • Enter the Rate Percent

  • Upon completion, click on Save Rate

New Tax Rate

Configure Product Tax Class in Magento 2

Go to Stores > Taxes > Tax Rules on the Admin sidebar.

If you already have a product tax class for VAT, you can skip these steps. Otherwise:

  • Select Add New Tax Rule

  • Expand the Additional Settings section

  • Click Add New Tax Class under Product Tax Class

  • rovide a Name for the new tax class.

  • Establish VAT Standard, VAT Reduced, and VAT Zero, then click Save Class

  • Finally, click Save Rule

New Tax Rule

New Tax Rule

Set Up Tax Zones and Rates

Access Stores > Taxes > Tax Zones and Rates on the Admin sidebar.

Choose Add New Tax Rate and fill in all the required information.

For instance:

VAT Standard

  • Tax Identifier: VAT Standard

  • Country and State: United Kingdom

  • Rate Percent: 20.00

VAT Reduced

  • Tax Identifier: VAT Reduced

  • Country and State: United Kingdom

  • Rate Percent: 5.00

After entering the details, click on Save Rate.

Configure Tax Rules

A tax rule is a combination of a customer tax class, a product tax class, and a tax rate.

Navigate to Stores > Taxes > Tax Rules on the Admin sidebar.

Add new tax rules and provide all the essential information as required.

For instance:

VAT Standard

  • Name: VAT Standard

  • Customer Tax Class: Retail Customer

  • Product Tax Class: VAT Standard

  • Tax Rate: VAT Standard Rate

VAT Reduced

  • Name: VAT Reduced

  • Customer Tax Class: Retail Customer

  • Product Tax Class: VAT Reduced

  • Tax Rate: VAT Reduced Rate

After entering the details, click on Save Rule.

Plus Tax Class to Products

Plus Tax Class to Products

  • On the Admin Panel, Catalog > Products.
  • In the product list, find the needed product and open it in the edit mode.
  • Set the Tax Class to VAT Class that applies to the product.
  • Click Save to complete.

VAT is an essential part when conducting any type of business, and it may differ based on the locations or the product type. However, you can configure VAT in Magento 2 with ease following the above guide. Also, it is possible to add tax to the total price as an extra fee. If you need to read more about tax-related issues, we have the related links below for you. Any questions or comments can be added in the box and we will reply to it as soon as possible.

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