EU Tax Guidelines

The following example depicts a store based in France that sells 100k+ Euros in France and 100k+ Euros in Germany.

  • Tax calculations are managed at the website level.
  • Currency conversion and tax display options are controlled individually at the store view level (Select the Use Website checkbox to override the default).
  • By setting the default tax country you can dynamically show the correct tax for the jurisdiction.
  • Fixed product tax is included for relevant goods as a product attribute.
  • It might be necessary to edit the catalog to ensure that it shows up in the correct category/website/store view.

Step 1: Create Three Product Tax Classes

For this example, it is assumed that multiple VAT-Reduced product tax classes are not needed.

  1. Create a VAT-Standard product tax class.

  2. Create a VAT-Reduced product tax class.

  3. Create a VAT-Free product tax class.

Step 2: Create Tax Rates for France and Germany

Create the following tax rates:

Tax Rates Settings
France-StandardVAT Country: France
State/Region: *
ZIP/Postal Code: *
Rate: 20%
France-ReducedVAT Country: France
State/Region: *
ZIP/Postal Code: *
Rate: 5%
Germany-StandardVAT Country: Germany
State/Region: *
ZIP/Postal Code: * Rate: 19%
Germany-ReducedVAT Country: Germany
State/Region: *
ZIP/Postal Code: *
Rate: 7%

Step 3: Set Up the Tax Rules

Create the following tax rules:

Tax Rules Settings
Retail-France-StandardVAT Customer Class: Retail Customer
Tax Class: VAT-Standard
Tax Rate: France-StandardVAT
Priority: 0
Sort Order: 0
Retail-France-ReducedVAT Customer Class: Retail Customer<
Tax Class: VAT Reduced
Tax Rate: France-ReducedVAT
Priority: 0
Sort Order: 0
Retail-Germany-StandardVAT Customer Class: Retail Customer
Tax Class: VAT-Standard
Tax Rate: Germany-StandardVAT
Priority: 0
Sort Order: 0
Retail-Germany-ReducedVAT Customer Class: Retail Customer
Tax Class: VAT-Reduced
Tax Rate: Germany-ReducedVAT
Priority: 0
Sort Order: 0

Step 4: Set Up a Store View for Germany

  1. On the Admin sidebar, go to Stores > Settings > All Stores.

  2. Under the default website, create a store view for Germany. Then, do the following:

    • On the Admin sidebar, click Stores.

    • Under Settings, choose Configuration.

    • In the upper-left corner, set Default Config to the French store.

    • On the General page, expand the Countries Options section, and set the default country to “France.”

    • Complete the locale options as needed.

  3. In the upper-left corner, choose the German Store View. Then, do the following:

    • On the General page, expand Countries Options, and set the default country to “Germany.”
  4. Complete the locale options as needed.

Step 5: Configure Tax Settings for France

Complete the following General tax settings:

Field Recommended Setting
Tax Classes  
Tax Class for Shipping Shipping (shipping is taxed)
Calculation Settings  
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 Tax Destination Calculation  
Default Country France
Default State  
Default Postal Code * (asterisk)
Shopping Cart Display Settings  
Include Tax in Grand Total Yes
Fixed Product taxes  
Enable FPT 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

Step 6: Configure Tax Settings for Germany

  1. On the Admin sidebar, go to Stores > Settings > Configuration.

  2. In the upper-right corner, set Store View to the view to the German store. When prompted to confirm, click OK.

  3. In the panel on the left, under Sales, choose Tax.

  4. In the Default Tax Destination Calculation section, do the following:

    • Clear the Use Website checkbox after each field,

    • Update the following values to match your site’s Shipping Settings point of origin.

      • Default Country
      • Default State
      • Default Post Code

      This setting ensures that tax is calculated correctly when product prices include tax.

      Default Tax Destination Calculation

  5. When complete, click Save Config.