How to set up my VAT treatment option

Video Demo

VAT Treatment - Setting up VAT strategy during onboarding

Overview

The VAT treatment feature allows you to generate fully VAT-compliant invoices, ensuring you get paid on time and meet your tax obligations. You can now specify exactly how VAT should be handled on your invoices.

Getting Started

Accessing VAT Settings

Option 1 - During Onboarding:

• Complete VAT treatment selection as part of your profile setup
• Provide VAT ID if applicable

Option 2 - Profile Settings:

1. Go to your profile settings
2. Find the VAT Treatment section
3. Select your appropriate VAT treatment
4. Enter your VAT ID if you have one

VAT Treatment Options

Choose the option that matches your tax situation:

1. VAT not included (Default)

• Use when: You don't charge VAT on your services
• Invoice shows: Standard format without VAT calculations
• Best for: Non-VAT registered contractors, certain service types

2. VAT not applicable

• Use when: Your services are exempt from VAT
• Invoice shows: No VAT-related information
• Best for: Non-EU contractors, exempt professional services

3. Reverse charge – "VAT to be accounted for by the recipient"

• Use when: Client is responsible for VAT accounting (common in B2B EU transactions)
• Invoice shows: Special notation about reverse charge
• Best for: Cross-border EU B2B services, specific business categories

4. VAT included + % (0-100%)

• Use when: You charge VAT at your local rate
• Invoice shows: Full breakdown with subtotal, VAT %, VAT amount, and total
• Best for: VAT-registered contractors in EU

Setting Up VAT ID

Why Provide a VAT ID

• Shows on your invoices for client verification
• Demonstrates VAT registration status
• Required for certain VAT treatments
• Helps with compliance documentation

How to Add VAT ID

1. Enter your official VAT identification number
2. Double-check for accuracy (format varies by country)
3. Save changes to your profile

Understanding Your Invoices

New Invoice Format

When VAT applies, your invoices now show as "VAT Invoice" with:

• Subtotal: Your net amount before VAT
• VAT %: The percentage you've set (e.g., 22%)
• VAT amount: Calculated tax amount
• Grand Total: Subtotal + VAT amount
• VAT ID: Your VAT identification number

Example Calculation

If your monthly payment is $1,220 with 22% VAT:

Subtotal:    $1,000.00

VAT (22%):   $  220.00

Grand Total: $1,220.00

Important: Rate Structure

Understanding Gross Rates

Your contracted rate is the gross amount (including VAT). This means:

• The rate you agreed upon includes any VAT charges
• VAT is calculated backward from your invoice grand total
• Your net payment (before VAT) will be lower than your contracted rate