Cross-Border Tax Rates

The cross-border tax rates are used to manage transaction-based taxes where taxes are to be reserved between various countries.

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A new cross-border rate for a certain tax type can be defined by clicking on Create.

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In the example above we have a customer that is taxable in the UK and we (the house that operates BFS) are located in the UK. The customer is going to receive a dividend from a company in Germany. This means that the source of the dividend is Germany and the destination is the UK. This is explained further in Get started with tax management in BFS.

Since both countries probably have a double taxation agreement we need to create a pair of entries. In this example, we have created one where the source is the UK and one where the source is Germany. For the described transaction example we would collect 10% on behalf of the source country Germany and 10% for the UK. If the second tax leg was not defined BFS would apply the Country Tax Rate defined for the UK so the customer would pay 10% to Germany and possibly 30% to the United Kingdom.