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A
anna49
March 15, 2021
Question

How to charge VAT tax for European Based Customers in Quickbooks Online if I am in Canada?

  • March 15, 2021
  • 3 replies
  • 0 views

Good morning, 

 

We are a Canadian, Ontario-based company and submit our HST/GST tax return quarterly to Canada Revenue Agency.

 

We have customers worldwide and some of them are located in Europe.

How should be VAT tax (EU) recorded in Quickbooks properly if I am located in Canada and start charging it to our Sales Invoices to European-based customers (who do not have VAT number)?

 

Should I add a separate TAX agency (European) with separate tax brackets for these purposes in addition to Canada Revenue Agency so it would be reflected in Tax Reports accordingly - is it allowed in Quickbooks Canada? Would it not mess our regular tax return?

 

Thank you very much for your time and support!

 

Best,

Anna

3 replies

J
JamesM4
March 15, 2021

Hi Anna,

 

Glad to have you reach out again. It's important you know how to charge VAT for European-based businesses and I'd be happy to steer you in the right direction. When it comes to managing your taxes, QuickBooks offers versatile solutions that make it simple to stay organized. 

 

Since you're using QuickBooks Canada, it's important to note that you'd have to set up the tax codes that align with your location. Knowing how to record the VAT is a crucial step towards keeping your books accurate and I recommend contacting an accounting professional for expert advice. If you're not in contact with one, I encourage you to search for one on our website using this link here. Doing this will help prevent any discrepancies on your account. I'll also leave this post here in the Community so other accounting professionals can chime in on this. 

 

If you'd like to proceed with setting up a tax code on your account, here's how: 

  1. Select Taxes from the left menu.
  2. Select Sales Tax at the top. (Tip: If you use payroll in QuickBooks Online, you may need to select Sales Tax as opposed to Payroll Tax)
  3. Select Manage sales tax.
  4. Click Add Tax.

For reference, check out this great article which shows you how to add a new sales tax code: How to set up a new sales tax code.

 

Once you've added the new sales tax code, you can now add it to your transactions going forward. If there any transactions from before that you'd like to edit, you'll have to manually update them. In the meantime, feel free to ask other questions by leaving a comment below. I'm here to help. Otherwise, I wish you a great rest of the week! 

A
anna49Author
March 23, 2021

Good afternoon,

Thank you for your reply.

For this reason, I created a Custom Testing VAT agency in my QB to test and see how to apply tax rates for EU clients. I've added a couple of custom rates and applied them to a couple of invoices.
When I generate Tax Summary (as well as Tax Detail) Report for this Agency, Quickbooks calculates Line "tax collected on sales" properly (I am able to see what Invoices and which rate has been applied to) and everything regarding taxes and their calculation looks correct.

However, for some reason, the amount for total sales, which should be reflected on line "Total taxable sales in period, before tax" is not calculated properly, even though when setting up the custom rate, I was specifically checking for the amounts to be reflected on this line "Total taxable sales in period, before tax".

I've attached the screenshot for your review.


If you can point out, why and what I am doing incorrectly (because it seems that taxes are correct but the net totals are not being added), it would be greatly appreciated.

Thanks again!

Best,
Anna

L
LauraAB
March 23, 2021

Hi again, Anna.

 

Thanks for keeping us posted on what's happening with your sales tax tracking in QuickBooks Online. I'm glad to see you're paying attention to these kinds of details and want to make sure you're able to get back on track with working with these figures in the program.

 

I see that you've included a screenshot of the report you're looking at where the amount you're expecting to see is missing. In this case, what we'd want to do is take a closer look at your setup to make sure that the program is properly configured to populate information the way you're expecting. For that reason, I recommend connecting with a member of our support team using one of the options here.

 

Schedule a Callback or start a Chat: click (?)Help in the upper right in QuickBooks Online > type and enter "Contact support" into the QB Assistant > click Contact Us > explain your situation > click Let's Talk > choose Get a callback or Start a Chat.

Social Media: Facebook, Twitter, and Instagram.
Support hours are from Monday to Friday between 9 a.m. and 8 p.m. ET.

 

Don't hesitate to give us a shout!

Rajanikanth
Rajanikanth
April 1, 2021

Hi, Anna

Goods and services that are normally subject to the GST/HST may be untaxed when exported from Canada. In this case, they are referred to as “zero-rated” goods or services.

When you invoicing select zero rated 0% as sales tax.

To find out how the GST/HST applies to exported goods visit  https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/charge-collect-imports-exports.html

Feel free to contact me for any clarifications.

LeithG
LeithG
April 1, 2021

Hi Anna

 

With regards to international sales, you are only required to collect taxes if you plan on remitting those taxes to the foreign government.  More often than not, countries will have rules stating that if tax is not collected by the supplier, the purchaser is responsible for remitting the appropriate taxes to their local governing authority.  As such, more than likely, you'd not want to add VAT to these invoices and select 0% / Exempt as your tax code with relation to PST/GST/HST and leave the customer responsible for remitting taxes to their own government.

 

If you plan on doing a lot of business in that region it may be worth signing up for a VAT number with the government and setting up remittances to them, but if it's infrequent, or not a bulk of your business, I wouldn't go to the trouble or expense.

 

Hope this helps!

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