If you sell products to, or receive Tips from, customers in the EU or UK, you may need to charge Value-Added Tax (VAT) on the transaction. Once you've set it up, Kit works out the applicable rate for each sale and sends your customer a VAT-compliant receipt.
DISCLAIMER: This article is neither financial advice nor tax advice. We recommend that you speak to your tax advisor with any questions or concerns about planning for your taxes.
In this guide:
NOTE: New to VAT, or not sure whether you need to charge it? Start with our guide to understanding your VAT obligations when selling to EU/UK customers.
Enable VAT collection in Kit
Click Settings in the lower left corner of your Kit account.
On the Settings menu, click Revenue.
On the Revenue page, scroll down to the Taxes section and enable the Collect VAT setting.
Next, fill out your business address in the Business Address section.
Click the Next button to go to the Jurisdictions section.
Under Jurisdictions, add all the tax jurisdictions in which you've registered your business for tax collection, then click Save.
Set up VAT for your products and Tips
With VAT collection enabled, each product and Tips needs a Product Type and a Tax Code so we know which rate to apply.
Product types and tax codes
The Product Type can be either a good or a service.
Here are the Tax Code options and when they apply:
Tax code | Applicable to: |
Consulting | Consulting or other professional services |
eBook | Electronic books |
Electronically supplied services | Digital goods or services (not including eBooks) |
Non-taxable | Tax-exempted goods or services |
Reduced tax rate | Any general goods or services that do not fall within any other category, and that are subject to reduced tax rates |
Software as a service (SaaS) | Software being sold on a subscription basis |
Generally taxable | Any general goods or services that do not fall within any other category, and that are subject to standard tax rates |
IMPORTANT: VAT is an inclusive tax, so make sure the price of your VAT-enabled products already accounts for VAT. VAT is not charged on top of the price you've set.
New products
Follow the steps here to create a new product. As you do, set the Product Type and Tax Code under the Product Price settings.
Once the product is live, we'll calculate the applicable VAT amount whenever an EU or UK customer buys it. The tax won't appear in the editor, but it's calculated as soon as a real purchase is made.
Existing products
Click the Earn tab in the top navigation of the Kit dashboard, followed by Products.
Click the product you want to set up. The product builder will launch. Click Settings at the top right to open the Product Settings window.
Under the Product Details tab, set the Product Type and Tax Code. (See the options above if you're not sure which to choose.)
Click Save. Repeat for your other existing products as needed.
Tips
When you create your Tips, fill out the Product Type and Tax Code settings.
For Tips you've already created, open them in the Tips builder, then click Settings at the top right to update the Product Type and Tax Code.
What your customers see when they buy
Once VAT collection is set up, here's what happens each time someone from the EU or UK buys a product or sends you a tip.
Your customer enters their location at checkout
If the customer is located in a jurisdiction where you're registered for VAT collection, your product's checkout page will display a Location field for their billing location. The checkout page also clarifies that all prices are inclusive of VAT.
We determine the applicable VAT rate
We use three data points to work out the rate for the transaction:
The customer's billing location, as they provided it
The customer's IP address
The customer's bank address
Your customer receives a VAT-compliant receipt
When the transaction is complete, we send the customer a VAT-compliant receipt. Among other things, it states:
Your registered business address
Your VAT registration number
The amount of VAT charged
The price breakdown
NOTE: If your receipts aren't showing the amount of VAT charged or the price breakdown, check that:
You've enabled VAT collection for your account, including your business address and the jurisdictions where you've registered for tax collection
You've set up the Product Type and Tax Code for the relevant product
The customer is from a jurisdiction where you've registered for VAT collection
Download your VAT report
When it's time to file your VAT return, you can download a report of every transaction where you collected VAT. The report contains:
A country-level report showing the number of VAT-applicable transactions and the amount of VAT collected for sales in each country
A transaction-level report showing your transaction history for each country
Go to Settings > Revenue and scroll down to the Tax Report section. Click the Download CSV button, and we'll send the download link to the email address on your Kit account.
Turn off VAT collection
If you're no longer liable to pay VAT, go to Settings > Revenue, scroll down to the Taxes section, and toggle Collect VAT off. Click the Save Tax Settings button to save your changes.