Context
With ProAbono, tax calculation and application are automated.
To calculate a tax, we rely on the applicable tax rate and the net price (excluding taxes) of the goods or services to which the tax should be applied. Here is the general formula to calculate a tax:
Tax = Net Price x Tax Rate
In service billing, it is common to include taxes and other fees associated with the price of the service. This means that the price indicated on the invoice will be the gross price (including all applicable taxes), which is the final price that the customer must pay for the service.
The applicable tax rate depends on the type of service and the country in which you are located. For example, in France, there are several VAT (Value Added Tax) rates that can be applied to services: the standard rate (currently 20%), the intermediate rate (currently 10%), the reduced rate (currently 5.5%), and the super-reduced rate (currently 2.1%).
It is important to note that certain VAT exemptions may apply to services, depending on their nature and destination. For example, some services provided to businesses may be exempt from VAT. As a service provider, you need to ensure that you are aware of the VAT rules that apply to your activity in order to correctly invoice your customers.
It is also important to note that tax rates can vary depending on the country you are in.
Taxes in ProAbono
ProAbono has its own tax calculation engine, so you don’t have to worry about it as long as ProAbono has the necessary information to calculate the correct tax rate for each situation.
Tax management in ProAbono follows the following points:
- If the customer is a European individual, the VAT of the customer’s domicile is applied.
- If the customer is a local company (from the merchant’s country), the VAT of the customer’s domicile is applied.
- If the customer is a non-local intra-community company*¹, the applied VAT rate will be 0% (self-assessment).
- If the customer is non-European (individual or company), the VAT rate will be 0%.
*¹ A customer is identified as a European company when the following 3 fields are present in the customer’s billing address in ProAbono:
- Company name
- Country
- Intra-community tax number (required to benefit from VAT self-assessment)