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Lago now features an automatic European tax detection integration for your customers.

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Enable Lago’s EU Tax integration

Activate Lago’s automatic EU tax detection in just a few steps:
  1. Navigate to your Lago instance Settings;
  2. Select the ‘Lago EU Tax Management’ integration;
  3. Enter or confirm your organization’s country; and
  4. Hit ‘Connect’ to activate this integration.

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Automated EU tax rates detection

When you connect the Lago EU Tax Management integration, it automatically generates a list of standard European tax rates. These rates, labeled as automated in Lago, are synchronized with the latest standard tax rates for European countries, ensuring your tax calculations are always up-to-date and compliant. Each tax rate begins with the lago_ prefix, ensuring a uniform and easily identifiable format across your tax rate list. This systematic approach simplifies the management and recognition of these automated tax entries within your system.

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Auto-application of taxes: decision tree

Before applying standard B2B/B2C rules, Lago checks the customer’s postal code to detect EU special territories — regions that are outside EU VAT territory or have reduced rates despite belonging to an EU member state. If a match is found, the territory-specific rate is applied and VIES validation is skipped. If no special territory is detected, Lago’s next step involves verifying if a customer has a tax_identification_number. This check occurs whenever a customer’s profile is created or updated, ensuring that the most current tax-related information is used in subsequent processes.

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Special territory detection

When a customer has a zipcode set, Lago matches it against known special territory postal code patterns. If matched, the standard country rate is overridden with the territory’s exception rate.
Make sure to set the zipcode on your customer profile. Without a postal code, Lago falls back to the standard country rate and special territory detection is skipped.
The following 17 territories are supported across 7 EU countries:
CountryTerritoryTax CodePostal Code PatternRate
SpainCanary Islandslago_eu_es_exception_canary_islands35xxx, 38xxx0%
SpainCeutalago_eu_es_exception_ceuta51xxx0%
SpainMelillalago_eu_es_exception_melilla52xxx0%
FranceGuadeloupelago_eu_fr_exception_guadeloupe971xx8.5% (B2B only)
FranceMartiniquelago_eu_fr_exception_martinique972xx8.5% (B2B only)
FranceGuyanelago_eu_fr_exception_guyane973xx0% (B2B only)
FranceRéunionlago_eu_fr_exception_reunion974xx8.5% (B2B only)
FranceMayottelago_eu_fr_exception_mayotte976xx0% (B2B only)
GermanyBüsingen am Hochrheinlago_eu_de_exception_busingen_am_hochrhein782660%
GermanyHeligolandlago_eu_de_exception_heligoland274980%
ItalyLivignolago_eu_it_exception_livigno230410%
ItalyCampione d’Italialago_eu_it_exception_campione_d_italia220610%
PortugalAzoreslago_eu_pt_exception_azores95xx18%
PortugalMadeiralago_eu_pt_exception_madeira9xxx22%
AustriaJungholzlago_eu_at_exception_jungholz6691, 699219%
AustriaMittelberglago_eu_at_exception_mittelberg6991, 699319%
GreeceMount Athoslago_eu_gr_exception_mount_athos630860%
France DOM-TOM exception: For French overseas territories (Guadeloupe, Martinique, Guyane, Réunion, Mayotte), the exception rate only applies to B2B customers (those with a tax_identification_number). B2C customers in these territories are charged the standard French rate of 20%, in line with French tax law (CGI Articles 294–296).

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B2B tax decision process

When a tax_identification_number is identified on a customer profile, Lago conducts a real-time verification using the EU’s VAT Information Exchange System (VIES) to confirm the existence of the company. In case the VIES check matches a valid company:
  1. If the customer’s company is registered in the same country as your organization, Lago applies the customer country’s tax rate;
  2. If the customer’s company is registered in the same country as your organization, but there is a tax exception for a particular zipcode, Lago applies the tax exception of this specific zipcode; or
  3. If the customer’s company is registered in a different country than your organization, Lago implements a reverse charge mechanism, applying a 0% tax rate.

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B2C tax decision process

If the VIES check does not confirm an active company or if no tax_identification_number is provided, Lago then assesses the country associated with your customer. Based on this:
  1. If your customer’s country is unspecified, Lago defaults to applying your organization’s country tax rate; or
  2. If your customer’s country is within the European Union, Lago applies the tax rate corresponding your customer’s EU country; or
  3. If your customer’s country is outside the European Union, Lago applies a tax exempt rate at 0%.

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Guidelines for VIES checks by Lago

Lago performs VIES verifications under these circumstances:
  • The Lago EU Tax Management integration is activated;
  • A customer profile is either created or updated. Changes in customer details could influence their applicable tax rates;
  • Zipcodes are important to define tax exceptions. Make sure to define them for all your customers; and
  • When a new tax rate is identified for a customer, Lago automatically updates the customer’s profile by replacing the old tax rate with the new one.

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Logging VIES verifications

Lago ensures transparency and compliance by logging each VIES check. This occurs whenever you create or update a customer. For each check, Lago dispatches a webhook message. This allows you to record these validations for compliance purposes. You can access and review any of these automated checks as needed.