In the EU, there's a special situation for businesses selling goods to each other. So this last paragraph is only applicable for businesses in the EU. Besides that, you only need to read on if you're selling to businesses (B2B), not when you're selling to consumers. Since Magento Version 1.7, a feature has been added to Magento to support business doing international sales.
This is the situation:
- VAT is charged if the buying company is in the same country as the selling company.
- VAT is not charged if the buying company is not in the same country as the selling company, but both are in the EU and they both have a valid EU VAT ID (the VAT ID is a kind of Tax registration number). This is because the VAT being charged is a special rate, which is currently zero percent.
The problem with the former versions of Magento was: how do you know if the buyer has a valid VAT ID? Well, in the past, extensions could have been be used to do the verification, but currently, this has become a standard function for all Magento versions.
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