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Zero Rate VAT sent to Xero

Currently products that are marked as ‘Zero Rate VAT’ in WooCommerce show as ‘No VAT’ or ‘Tax on Sales’ in Xero, which results in incorrect VAT returns. This is bad news for businesses that have Zero Rate VAT products configured.

Current Status

Open

Last updated: January 19, 2017

4 comments

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  1. Jon Norman says:

    this is a bug which doesn’t seem too high on the priority list!!

    you can fix your self by editing woocommerce-xeroincludesclass-wc-xr-line-item.php

    change lines 210 – 215 to reflect this:

    // Is this item tax exempt? Tax exempt Xero tax types vary by country
    if ( $this->get_tax_amount() <= 0 ) { $tax_type = 'ZERORATEDOUTPUT'; $logger->write( ” – Item has zero tax. Returning tax (exempt) type ($tax_type)” );
    return $tax_type;
    }

    where ‘ZERORATEDOUTPUT’ is the tax class you want zero-rated items to have applied.

    See the dev docs for more info

  2. Hans says:

    I have the same issue with NZ GST. This affects the information passed to Inland Revenue Department (IRD) for the GST return, so it really needs to be corrected (returns submitted to the IRD must be accurate).

    My current workaround is to do a search & modify before filing the GST return, but that’s very unsatisfactory.

    Jon’s fix is interesting, but your own modifications get overwritten every time there’s an official update. Hence, it really needs a proper fix.

  3. Karen says:

    I’m surprised this topic isn’t full of posts requesting this fix. To complete an accurate VAT Return, every VAT-registered UK company that makes sales to customers outside the UK needs to classify their sales as Zero Rated Income, not the Xero default of No VAT. Since Brexit, this now includes sales to anyone in the EU as well as the rest of the world.

    The Find & Recode feature in Accounting > Advanced is useful for doing a bulk change from No VAT to Zero Rated Income just before doing a VAT Return, but this really shouldn’t be necessary. I guess many small UK businesses trust Xero and have no idea that the No VAT code is not correct, which means they could run into VAT audit problems down the line.

    I tried Jon Norman’s fix and promptly received three complaints from customers that their payments wouldn’t go through, so that’s not a viable solution to this problem either.

  4. Karen says:

    Problem solved. Ena, who is one of WooCommerce’s Happiness Engineers, recommended I checked the box at WooCommerce > Xero > Match zero value tax rates. I thought it wouldn’t apply to my situation because it says it’s about matching tax exempt line items with a tax exempt Xero tax rate, but I tried it and it worked.

    A sales invoice from a non-UK customer has just arrived and it is correctly coded as Zero Rated Income. This may have something to do with the fact that in WooCommerce > Settings > Tax > Additional tax classes, the only listing I have there now is Zero Rated Income so the system is selecting that rather than Exempt Income.

    I hope this information helps someone else who has this problem too.

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