Adding VAT (Value Added Tax) to Google Ads campaign manager can seem daunting at first, but it’s actually quite straightforward once you know the steps. VAT is a tax added to certain goods and services in many countries around the world. If your business is required to charge VAT on advertising services provided to clients, you’ll need to enable this in your Google Ads account.
Why Do I Need to Add VAT to Campaign Manager?
There are a few key reasons why you may need to add VAT charges in Google Ads:
- You are a business located in the EU or other country that requires collecting VAT
- You provide advertising services to clients located in countries requiring VAT charges
- You want your ad costs and invoices to accurately reflect taxes owed
Enabling VAT allows you to stay compliant with tax laws in the countries you operate in. It also ensures your clients receive invoices that break out taxes properly. Failing to charge VAT when required could lead to penalties, interest, and other problems down the road.
How Does VAT Work in Google Ads?
Google Ads supports adding VAT charges at the account, campaign, ad group, keyword, and asset levels. This flexibility allows you to configure VAT precisely based on where your clients are located and the types of services you offer.
For example, if you manage Google Ads accounts for clients across the EU, you may charge different VAT rates for clients in different countries. You can set up VAT rates at the account level to automate this. Or you may charge VAT on ad management services, but not on other consulting services. Configuring VAT at the asset and campaign level gives you control over this.
No matter how you choose to set it up, Google will then automatically calculate VAT on invoices based on the ad costs in each campaign and destination.
Step 1: Confirm VAT Requirements for Your Business
Before setting up VAT in Google Ads, it’s important to confirm the precise VAT requirements for your business. Key things to review:
- What services do you need to charge VAT for?
- What rates should be charged based on the client’s location?
- Will you charge VAT on all services or only specific campaigns?
- Who is responsible for paying the VAT – you or your client?
Reaching out to an accounting professional can help ensure you understand the rules properly. Getting this right from the start will save major headaches down the road.
Step 2: Enable VAT Charges in Google Ads
Once you’re clear on the VAT requirements, navigating to your Google Ads settings is the next step:
- Click on Tools and Settings and select the Billing tab
- Click on VAT and Tax Settings
- Select your country from the drop-down menu
- Click Save to enable VAT accounting
With VAT accounting enabled, you can now go in and configure specific tax rates.
Step 3: Set Up Tax Rates
Google allows you to set up tax rates at multiple levels, as mentioned earlier. Here are some of the most common ways to configure it:
Account Level
If you want to charge the same rate for all clients/ campaigns in a particular country, you can simply set the VAT rate at the account level. For example, to charge 20% VAT on all services for your clients in France, you would:
- Click the Accounts tab
- Select the account
- Under Settings select VAT & Tax
- Enter 20% as the VAT rate for France
Campaign Level
To customize VAT for specific campaigns, you can override the account-level setting at the campaign level. For example:
- Click Campaigns tab
- Select a campaign
- Under Settings click VAT & Tax
- Enter a different rate for this campaign
Asset Level
For maximum flexibility, you can also set VAT rates for specific ad groups, ads, keywords within a campaign. For example, to zero rate VAT for certain keywords:
- Go to Keywords tab in the campaign
- Select keywords to adjust
- Under Keyword VAT, choose “Disable VAT”
Step 4: Confirm VAT Setup and Charges
It’s important to test and verify your VAT configuration to make sure charges are being applied correctly. Ways to check:
- Look for VAT column in campaign, ad group and keyword reports
- Check VAT totals on your invoices
- Compare VAT costs for campaigns with different tax rates
- Request a VAT reconciliation report from Google
Checking these early on allows you to catch any discrepancies and adjust your rates and settings before issuing official invoices.
Step 5: Issue VAT Invoices
Once your VAT setup has been verified, you’re ready to download invoices inclusive of taxes to share with your clients. To do this:
- Navigate to the Invoices page
- Select the campaigns/months to include
- Click Download
- The PDF will include a detailed VAT summary
Be sure to download your VAT invoices on a timely basis and review prior to sending to your clients. This gives you a last chance to catch any issues.
Frequently Asked Questions
How often do I need to update VAT rates in Google Ads?
It’s a good idea to review your VAT rates in Google Ads on a quarterly basis and update them if laws or rates have changed. Rates do change periodically, so regular checks ensure you stay compliant.
Can I set up different VAT rates for each client?
Yes, the account and campaign-level tax settings allow you to customize VAT for each client account or specific campaigns you run for them. The asset-level rates then allow maximum precision.
What happens if my VAT setup is inaccurate?
Issuing incorrect VAT invoices can lead to fines, penalties, interest charges, and other problems. It’s critical to have an accounting professional review your Google Ads VAT configuration and make sure it aligns with all requirements.
Who is responsible for paying the VAT – me or my client?
This depends on your contracts and reseller arrangements with clients. In most cases, the VAT is ultimately owed by the advertising purchaser, but check your agreements. Proper invoices are crucial either way.
Conclusion
Adding VAT to Google Ads campaigns can seem complicated, but just take it step-by-step. Confirm the tax requirements for your business, enable VAT accounting in your settings, set up tax rates at the appropriate levels, test charges, and issue regular VAT invoices to clients.
With the right configuration, Google Ads will automatically handle all the complex VAT calculations and include taxes on invoices. Just be sure to validate the setup initially and review it quarterly. Reach out to an accounting advisor if you need help getting it right. This will ensure you remain compliant and avoid any VAT-related penalties down the road.