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How does Avalara Support Place of Supply Rules for VAT?

Overview

You want to know how Avalara supports Place of Supply rules for VAT, Permanent Establishment, and Seller Importer of Record.

Environment

Avalara AvaTax

Resolution

  • Place of Supply rules for VAT depend on a few settings and the transaction details:
    • You have to have Global tax calculation service, ask your account manager to add Global service
    • You set if you have nexus and Permanent Establishment in the corresponding jurisdiction (country) in Nexus
      • Default value for Permanent Establishment is True for each country you select
      • Transactions tax differently depending on if the Destination is a country where you have selected nexus
      • Transactions for physical goods are taxed differently if you have set nexus in the destination country, and are physically present or are not physically present
    • You set Seller is Importer of Record on each transaction, whether via a GetTaxRequest from your accounting system or in the Admin Console
      • Default value for "Seller is importer" is False on every transaction unless set to True
      • The checkbox in the Admin Console is visible on any Transaction or in the Advanced Tax Calculator
      • Transactions for physical goods are taxed differently, depending on whether the Seller is Importer of Record, or not
    • You set what is being sold via a Tax Code at the line level on each transaction
      • Seller is Importer of Record has a different effect on Physical, Freight, and Digital goods

 

Note: Some key features to consider:

  • Currently all supported VAT countries follow Place of supply rules
    • If any specific custom tax rules are required they are added on top of place of supply rules 
  • Place of supply rules do not apply for US Imports and Exports.
  • Reverse Charge is only supported when destination address is an EU country
    • For NonEU to EU purchase transactions Reverse charge will not be calculated for Tax Code Type P (Goods) and TaxCode Type D with IsPhysical=True (DigitalGoods)
  • Reverse charge will be calculated for both conditions when Business Identification No is present or absent.