The government is raising VAT as of July 1, 2013. The VAT will increase from 20 to 22 percent, and the lower rate from 8.5 to 9.5 percent. For all those interested in how the changes will affect the display of prices and tax accounting in the online store, we have prepared guidelines for adapting the store and business operations.
The general VAT rate will increase from the current:
- general rate of 20 to 22 percent,
- reduced rate from 8.5 to 9.5 percent.
The government expects an additional 250 million euros annually from the VAT increase, and 100 million euros this year.
"For consumers, a higher tax can mean only a greater or lesser price increase, depending on the judgment of goods and services providers, and how much of the higher rates they will pass on to prices. For example, if the annual tax base for food is 4000 euros: at the current 8.5 percent rate, we add 320 euros for VAT to this amount, and at the 9.5 percent rate, 380 euros." (source: delo.si)
"Retailers strongly oppose the VAT increase, as this government move is expected to have catastrophic consequences for the Slovenian economy and consumers. Representatives of the Chamber of Commerce of Slovenia are additionally concerned about the deadline for the introduction of higher VAT and say that the increase on July 1 does not allow the economy enough time to prepare all appropriate measures that could possibly mitigate the consequences." source: MP.si
What is the impact of tax on the store and prices in the store?
There are two scenarios available, namely for stores that have entered prices without tax and for those that have item prices with tax.
Stores with prices entered without tax
If you have entered prices without tax in the store, in this case, the final prices for the customer will be higher, and you will receive a higher amount for the item, but you will have to pay more tax to the state. This means the burden of increased tax will be on the customers. With the unchanged item price, it may happen that due to the higher price of the item, it will be more expensive than the competition and therefore less attractive in the eyes of customers, which can affect the number of purchases in the store.
Example of a fictional item price with an entered price of 100€:
| 20% tax: | 22% tax: |
| Selling price: 120€ Tax: 20€ Remainder: 100€ | Selling price: 122€ Tax: 22€ Remainder: 100€ |
Stores with prices entered with tax
In the opposite case, when you have item prices entered with tax in the store, these will remain unchanged for your customers, and the change will be noticeable on your side. With the change, you will have prices with a larger taxable portion, and you will earn less.
Example of a fictional item price with an entered price of 120€:
| 20% tax: | 22% tax: |
| Selling price: 120€ Tax: 20€ Remainder: 100€ | Selling price: 120€ Tax: 21.64€ Remainder: 98.36€ |
How to set the tax in the Magento online store?
We have prepared a procedure for you on how to change tax rates in the Magento online store. You manage the tax in the online store by logging into the administration at the link Sales / Tax.
