VAT Currency Clarification

In our opinion, since the returns are official documents, they must use a real USD/GBP exchange rate. That is, if you sell for 100 USD, you should file a VAT return in the UK for the exact equivalent in GBP. Entering a manual rate could result in a skewed conversion and, potentially, compliance issues.

Important
Please note that we are not accountants and we can’t give advice on these topics. We recommend to contact your tax advisor to make sure that you configure the EU VAT Assistant correctly.

Hi Diego,

First of all, I want to ask you kindly please read this message entirely. I would very much appreciate if you can answer all my questions. It is really important, since I don’t have a good understanding of how your plugin works.

I just got written confirmation from the HMRC VAT office that the rate I need to use is a fixed rate. At the end of each quarter, they publish a fixed rate table here:

https://www.gov.uk/guidance/vat-moss-exchange-rates-for-2019#exchange-rates-ending-december-2019.

(As I understand you and your team aren’t tax advisers, kindly speaking, I don’t need your advice on which rate I need to use).

So, as an example, to better follow along, if my total USD sales for Q4 2019 was $99 (assuming I only sold to UK with a 20% VAT), using the above link as a reference, the fixed rate I need to use to convert to British pounds would be 1.3204￡. Using this rate, my total Q4 2019 sales in British pounds would be 74.98￡. The Moss One Stop Shop system would then AUTOMATICALLY CALCULATE THE TOTAL VAT DUE.

So, to emphasize, when I submit my numbers on their platform, I DON’T need to submit VAT in British pounds. Only TOTAL SALES in BRITISH POUNDS as the system would then AUTOMATICALLY CALCULATE VAT.

So, a couple of important questions for you (here’s where I need your feedback):

1. I need to better understand the currency section in your plugin. For NOW (since fixed rates get published at the end of each quarter) if I select the default USD currency without manually inserting an exchange rate, will my report just show total SALES AND VAT in USD? Based on my inquiry with HMRC, for NOW and every quarter, I don’t really need the report to show total VAT in USD. But if it does, I will just ignore it.

2. Since the fixed exchange rates get published at the end of each quarter on the HMRC’s website, come quarter end, can I tell your plugin to apply HMRC’s fixed rate so that the report can automatically convert my total SALES into British pounds?

For question #2, let’s use the same example so both of us can follow along more easily. ..

If today, marked the end of Q4 2019, in your plugin, where would I go to apply the fixed rate of 1.3204￡? I am assuming in the Currency section. If that’s the case, since my default VAT currency was originally set to USD, would I need to change it to Pounds Sterling AND manually apply the 1.3204￡ exchange rate right below the Exchange Rate Section?

If I make these changes at the end of the quarter, even though in the beginning these fields were set to different values, if I generated the report today (i.e. at the end of the quarter), would your plugin automatically update the report to reflect my changes? In other words, if I generate the report today, would it show total sales and VAT due in British Sterlings using the 1.3204￡ exchange rate?

So sorry for the lengthy message, but it’s very critical to clarify these points with you, because I don’t know how your plugin works intricately.

Thank you so much!

The EU VAT Assistant generates all its reports in the currency you selected as the “VAT currency” in the plugin settings. It won’t produce reports in any other currency.

The VAT MOSS reports are generated using the following rates:
1. The exchange rate stored with each order, which is the one available when the order is completed.
2. The exchange rate from the last day of the quarter, from the official European Central Bank source (which should be the one that HRMC takes as well). If this information is not available (e.g. because we’re not yet past the end of the quarter), the rate stored with each order will be used instead (i.e. you sill still see a report in GBP, not in USD, generated using the exchange rates saved with each order).

You can go to WooCommerce > Reports > Tax > EU VAT by Country to see those options, at the top of the page: https://prnt.sc/qufyd5.

If you select the 2nd option (i.e. “exchange rate from the last day of the quarter”) that rate (e.g. 1.3204) will be applied to all the orders received in such quarter.

You can also find more information about each option by clicking on the “What is this?” link, next to each section.

Hi Diego,

Thank you so much for this informative reply. ??

I am so sorry but I have a few more other questions to ask:

1. You mention “from the official European Central Bank source”. In the currency section of this plugin, there are several exchange rate providers. For my use case, if I want to pull the last rate used for the quarter from HMRC’s website, do I use ECB or HMRC?

2. If for now, let’s say I choose Pounds Sterling for VAT currency (not the default USD) and generate the report in this currency after the end of the quarter. If for whatever reason I need to see this report in USD after the quarter end, can I go back, change the currency to USD, and re-generate the report in USD or will it be too late?

3. If for now, I choose Pounds Sterling for VAT currency, I will be filing the VAT report using the last rate of the quarter. As such, I don’t care about daily or real-time exchange rates. However, if I just want to get a rough estimate of the total VAT collected per order, I can just tick the box to enable automatic updating of exchange rates and select a frequency of once weekly, right? I don’t want the plugin to have to constantly check the exchange rate and possibly put a constraint on the server. So I think a frequency of once weekly seems reasonable just to get a rough idea of VAT per order, right?

4. To add to #3 above, if I choose automatic update of exchange rates, once weekly, I don’t think the ECB or HMRC keeps a record of daily rates. If this is the case, for now, should I just select bitpay in order for my rates to update once per week?

Again, I apologize for these lengthy questions. Appreciate the fast level of support!

Please find the answers to your questions below:

1. When you run the report and select the “European Central Bank” rates, the Currency Switcher will fetch the rates from the ECB feed automatically. This is independent from what you configure in the EU VAT Assistant settings, in the Currencies section. That section is used to select the exchange rate to use when the orders are created.

You can choose HMRC in the Currencies section, and still use the ECB rate when running the report (i.e. two different rates).

2. The VAT information is collected and stored against each order when the order is created, in the currency you chose for VAT reports. If you change that currency to USD, past orders will still have GBP data saved against them. You can’t switch from one to the other, to run reports in different currencies.

3. Usually, the HMRC updates their rates monthly. A weekly frequency would be sufficient to keep the rates up to date, also in case they update them within the month.

4. As far as I know, ECB does offer a daily feed with the rates. If you want to have rates that are updated daily, you can use ECB, or Bitpay.

Thank you so much Diego. This all makes sense now. ??