The Tax Simulator shows how a single sale or purchase is taxed. You enter the countries, the parties and the product, and the simulator shows the VAT treatment and the rule behind it. This article explains how to run a simulation and how to read the result.
Running a simulation
Before you start, add the Tax Simulator to your space from the Banqup Store. See Understanding Banqup Tax Validation for how to install it.
Click See all apps at the bottom of the sidebar, then Tax simulator.
Under Invoice type, choose Sales transaction or Purchase transaction.
Choose the Seller country and the Buyer country.
Under System tax product, choose the type of goods or services, for example mobile phones or construction work. When you open the simulator, it is set to Default standard rated goods.
If goods are shipped, check that the Ship from country and the Ship to country match where the goods start and end.
Click Calculate.
The result appears below the form. To start again with an empty form, click Clear form.
Choose the product carefully: The product has a big impact on the result: it can change the rate, the country where VAT is due, or who pays it. A general product, such as Default standard rated goods, always returns the standard rate, even when a reduced rate or a special rule would apply to your goods.
If you know the HSN code of the goods, you can use it instead of a product. First remove the System tax product with the cross next to it, then enter the code under HSN code. You cannot use both at the same time.
Good to know: The Tax Simulator only shows a result. It does not create, send or change any invoice, so you can test as often as you like.
Adding seller and buyer details
The countries are enough for a first result. For a more precise result, add details about the seller and the buyer. The most important one is the VAT number: a sale to a business with a valid VAT number in another EU country is often taxed differently from a sale to a private person.
Click Seller details or Buyer details.
Fill in the fields that apply, for example:
Tax ID country, Tax ID number and Tax ID type for the VAT number.
Private individual (B2C) if the buyer is a private person.
Small enterprise if the seller or buyer uses a small business VAT scheme.
Click Close, then click Calculate again.
For example, a Belgian company selling goods to a German company, with the goods shipped from Belgium to Germany:
Without the buyer's VAT number, the result is 21 % Belgian VAT.
With the buyer's German VAT number, the result is 0 %, with the invoice wording "exempt from VAT - EU supply".
Simulating a purchase
Choose Purchase transaction to see how much VAT you pay and how much you can deduct. The seller is your supplier and the buyer is your company.
For example, a Belgian company buying goods from a German supplier, with the goods shipped from Germany to Belgium:
Reverse charge shows Yes: the supplier's invoice has no VAT, and you account for the Belgian VAT yourself.
Payable tax and Deductible tax both show the VAT amount, so the purchase costs you no VAT in the end.
Tax deduction shows which share of the VAT you can deduct, for example 100 %.
If your company can only deduct part of its VAT, enter the percentage under Deduction limit in Buyer details.
Adding transaction options
Some transactions need extra information, for example a sale involving three companies in three EU countries (triangulation) or goods that are installed at the destination.
Click Extra fields.
In Transaction options, select the options that apply to your transaction.
Click Save. The options are added to the form, switched off.
In the form, switch on the options that apply.
Click Calculate.
For example, a Belgian company selling goods to a private person in Germany charges German VAT (19 %). If the company's total sales to private persons in other EU countries stay under the EU threshold of 10,000 EUR per year, switch on Distance sales under threshold: the result becomes Belgian VAT (21 %).
You can also fill in the Tax point date and the Incoterm directly in the form when they matter for your transaction.
Reading the result
The result has two parts.
Tax treatment shows how the transaction is taxed:
Transaction type: for example DOMESTIC for a sale within one country, or EU for a sale between two EU countries.
Transaction location country: the country where the transaction is taxed.
Rate type and Rate percentage: the VAT rate that applies, for example a standard rate of 21 %.
Reverse charge: whether the buyer pays the VAT instead of the seller.
Transaction memos: short notes that explain the outcome, for example "Taxed EU supply of goods". This is where the result explains the rule behind it.
Tax reporting shows the amounts and codes:
Taxable basis: the amount the VAT is calculated on. The simulator uses a sample amount of 500.
Tax amount on invoice, Payable tax and Deductible tax: the VAT on the invoice, the VAT to pay and the VAT you can deduct.
System tax code: a code that sums up the treatment.
System invoice wording: the text that must appear on the invoice, for example for an exempt EU supply.
If your space has its own settings in the Tax configuration app, the simulator uses them. The result then also shows your own tax code and invoice wording, next to the standard ones.
To see the full technical request and response, click JSON next to Tax treatment. This is useful if you also work with the tax rules through an API: see Getting started with the tax calculation service on the Banqup developer portal.
Good to know: The simulator shows which rule and rate a result rests on. It is not tax advice: for the decision on a specific transaction, involve your tax team or your client's adviser.
FAQ
Why do I get an error when I click Calculate?
Some information is missing or does not match. Check that you chose a Seller country and a Buyer country, then click Calculate again.
Can I enter my own amount?
No. The simulator always calculates on a sample amount of 500. When a rule depends on an amount, you choose the situation instead. For example, switch on Distance sales under threshold in Extra fields, or choose a product marked "over RC threshold", such as Mobile phones - Trading (or over RC threshold if any).
Can I simulate transactions for my clients?
Yes. The Tax Simulator is not linked to a specific client, so you can test transactions for any client from your Partner Space.
Next steps
Understanding Banqup Tax Validation