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Classifying Tax Rates

A tax rate in Fiskl records what a tax is, not only what it charges. This page explains each question on the tax rate form and what your answer affects.

Why Classification Matters​

A percentage on its own does not say much. Four tax rates can all show 0% on an invoice and belong in four different places on a tax return:

  • Zero-rated sales are taxable at 0% and count towards your total sales.
  • Exempt sales are not taxable, and having them can restrict how much tax you reclaim.
  • Out of scope sales do not belong on the return at all.
  • Reverse charge sales show no tax because your client accounts for it, and they still have to be declared.

The invoice looks correct in all four cases. Classification is what tells Fiskl which one you meant, so each transaction reports in the right place.

Before You Begin​

Set up a tax agency first. Every tax rate belongs to one. See Tax Management for the steps.

Where This Applies​

Fiskl classifies tax rates in these countries:

  • Every European Union member state except Hungary
  • United Kingdom
  • United States
  • Canada
  • Australia
  • Singapore
  • United Arab Emirates
  • South Africa

In these countries the rate form asks the questions on this page. The tax types it offers are filtered to the country of the tax agency.

In other countries the tax rate form is simpler. You enter a name, a percentage, and a tax agency, then set This is a sales tax. None of the questions on this page appear.

How Fiskl Uses Your Classification​

Fiskl applies your classification at line level on every transaction. Auto-categorisation carries the tax rate with the ledger account, from your rules and the merchants you have already confirmed.

Classification covers taxed, zero-rated, exempt, reverse charge, out of scope, and withheld-at-source treatments. For cross-border sales to consumers in the EU, Fiskl supports the One-Stop Shop, so you charge each country's VAT and report it through one registration.

Your tax position updates in real time. You can see your liability by jurisdiction and tax agency, in local currency, across every country you trade in.

The Classification Questions​

Go to Settings > Tax Management > Taxes, then select Add rate, or select an existing rate to edit it.

Behaviour​

Behaviour is the plain-English meaning of the tax. Fiskl offers only the behaviours that fit the tax type you select. An option marked needs a different rate does not fit the percentage you entered.

OptionUse it when
TaxedYou charge tax at a positive rate.
Taxed at 0%The supply is taxable, and the rate is zero.
ExemptThe supply is not taxable and no tax is charged.
Counterparty accountsYour client accounts for the tax, such as a reverse charge.
Outside scopeThe supply falls outside the tax system entirely.
Not registeredYou charge no tax because you are not registered or not required to be, for example below a registration threshold.
Withheld at sourceThe payer deducts the tax before paying you.
warning

Exempt and Outside scope are not the same thing, even though both show no tax on the invoice. Exempt supplies usually appear on your return and can reduce how much tax you reclaim. Out of scope supplies do not appear at all. Select the wrong one and your return is wrong in a way the invoice will not show you.

Tax Type​

Tax type is the kind of tax, such as VAT, GST, or Sales tax. Fiskl offers only the types that exist in the country of the tax agency. A Canadian agency offers GST and Sales tax. A German agency offers VAT.

Rate Band​

Rate band groups the rate as Standard, Reduced, or Super-reduced. It appears for VAT and GST style taxes, where governments publish rates in named bands. It is hidden for sales taxes, which do not use bands.

A charged rate needs a rate band. If you leave it empty, the rate cannot be saved.

Base​

Base is how the tax is calculated. A percentage of value covers almost every case.

Reclaimable​

Reclaimable records whether you can recover the tax you pay.

OptionMeaning
YesFully recoverable.
PartialRecoverable in part. Enter the recovery rate.
NoNot recoverable. Select a recovery reason.
N/AThis tax has no recovery mechanism.

Select No and a Recovery reason appears, so your return records why the tax was blocked rather than only that it was.

Exemption Reason​

When you select Exempt, Fiskl asks for an Exemption reason, and the rate cannot be saved without one. The reason records which exemption applies, not only that the supply is exempt.

The reasons are specific to the country of the tax agency and use the wording of that country's tax law. Fiskl offers 660 reasons across 34 countries. On German Factur-X e-invoices, the reason appears in the invoice XML. See E-Invoicing with Factur-X.

Jurisdiction Code​

You do not enter this. Fiskl builds a code from your answers when you save, and shows it on the rate. The code is how your reporting identifies the rate, which is why the answers above matter more than the rate name.

One Stop Shop Rates​

The EU One Stop Shop lets you charge each EU country's VAT on cross-border sales to consumers, and report it through one registration. When you set up a rate for these sales, the rate form asks two more questions:

  • Member State of consumption — The EU country where your client consumes the goods or services, whose VAT rate you charge
  • OSS section — The kind of One Stop Shop sale, such as a distance sale of goods

The form also explains When the One Stop Shop applies. Fiskl does not decide whether you have crossed the EUR 10,000 threshold, so confirm your position with your adviser or tax authority.

For a United Kingdom registration, toggle Northern Ireland Protocol on to use the One Stop Shop for distance sales of goods from Northern Ireland. See Tax Management.

Classifying Existing Rates​

Tax rates created before classification was introduced are marked Needs classification. They still calculate tax on invoices and expenses, and they do not report correctly until you complete them.

To classify one:

  1. Go to Settings > Tax Management > Taxes.
  2. Find the rate marked Needs classification.
  3. Select the actions menu beside it, then select Classify.
  4. Answer the questions above.
  5. Select Save.

A rate cannot become the default until it is classified.

tip

Work through your most used rates first. A rate you apply every day is worth more than one you have used twice.

Common Issues​

A rate is marked Needs classification

The rate was created before classification existed, or it was saved without a complete set of answers. Open the rate, complete the questions, and select Save. The badge clears once the rate classifies.

Fiskl will not save a rate without a rate band

Charged rates need a rate band. Select Standard, Reduced, or Super-reduced and save again. If no rate band field appears, the tax type does not use bands and something else is blocking the save.

Rate band does not appear on the form

Rate bands apply to VAT and GST style taxes. Sales taxes do not use them, so the field is hidden when you select Sales tax as the tax type.

Fiskl will not save an exempt rate

Exempt rates need an Exemption reason. Select the reason that matches the exemption in your country's tax law, then select Save. If the list is empty, select a Tax type first.

A behaviour is marked as needing a different rate

That behaviour does not fit the percentage on this rate. A rate's percentage is fixed once you create it, so archive the rate and create a new one with the right percentage.

None of the recovery reasons fit

The recovery reasons cover taxes that have a recovery mechanism with restrictions. If your tax has no recovery mechanism at all, select N/A for Reclaimable rather than No.