• DesktopShipper

VAT Mapping

Updated: 2 days ago

Download the PDF Version Here

What is VAT?

Value-Added Tax, or VAT, is a tax collected by all sellers on all products and services at all points in the supply chain where value is added. On taxable sales, suppliers, manufacturers, distributors, and retailers are all required to collect VAT. In other words, the amount of VAT applied is equal to the cost of production, less any material costs that have been taxed in a previous phase. Many countries impose this tax, but the United States does not. However, US sellers who ship internationally and cross borders are subject to VAT. The tax is most commonly found in the European Union. Depending on the seller's location, the customers' location, the type of products being sold, how the products are delivered, and the number of sales, the VAT rates may differ.

Registering VAT

Businesses charge and collect VAT from their customers and then register it separately for each country. VAT payments are registered by the Import One Stop Shop (IOSS) in the EU, but international sellers have a different process in the UK. Registration for a VAT number and the creation of an online account with HM Revenue and Customers (HMRC) are required. In addition to the purchase price, VAT will be collected and paid to HMRC each quarter. You can also obtain information about your UK sales by reviewing your quarterly VAT returns.

VAT Mapping

For a seamless international shipping process, it is pertinent to take into account all the revised VAT and customs requirements. In order to begin VAT mapping, customers are assigned to a VAT zone, usually represented by their location within a country or state. Each VAT group corresponds to a particular type of goods or services. It is the VAT code that specifies the actual type of VAT applied to the invoice. In order to determine which VAT code will be applied at what time, VAT mapping takes all of these elements into account. Unmapped transactions may result in late fees or compliance costs.


In countries that use VAT, such as the EU, the VAT number serves as a means of verifying that the customer is who they claim to be. By doing so, VAT can be charged correctly. A VIES validation tool can be used to verify the number. Additionally, the rate of VAT added to the sale will need to be verified on location. VAT rates differ per country, so using a tax invoice will enable you and the customer to see the amount and rate of VAT on each sale.


The performance of your business may be negatively affected if you do not understand how cross-border shipping is taxed. To remain compliant with VAT regulations, you must charge the correct VAT amount to your customers, pay each country through each specific registration site, and maintain accurate records.

Stay updated on VAT changes to ensure no mistakes occur during the shipping process.

How to set up your DesktopShipper account to Ship with or without the newly EU-required IOSS/VAT Tax Registration Id.

10 views0 comments