VAT Settings: Rates of 20%, 7%, 14%, 0%, and Exempt Categories

VAT Settings in Torgsoft: Product Types, Rate Codes for 20%, 7%, 14%, 0%, and VAT-Exempt Categories

When a company becomes a VAT payer, sells goods subject to different rates, or, for example, a VAT-registered LLC and a non-VAT-registered Sole Proprietorship operate in the same Torgsoft database, a single general VAT percentage is not enough. You need to determine where the software should obtain the VAT rate for each product, correctly configure product types and enterprises, check the taxes in the PECR, and avoid confusing the zero rate with VAT exemption.

As of October 3, 2026, the Tax Code of Ukraine provides for VAT rates of 20%, 7%, 14%, and 0%. Certain transactions are also exempt from VAT. tax.gov.ua

VAT Rate and Rate Code: What Is the Difference?

In Torgsoft, it is important to distinguish between the VAT percentage and the VAT rate code.

The percentage is 20%, 7%, 14%, or 0%. The rate code is used, among other things, when generating a tax invoice. For 20%, 7%, and 14%, the code matches the numerical value of the rate, while special codes are used for zero-rated and VAT-exempt transactions. zak.tax.gov.ua

Therefore, there is no rate code «0» in a tax invoice. Code 901 or 902 indicates a zero-rated transaction, while 903 indicates a VAT exemption. These are different tax treatments. zak.tax.gov.ua

Also, do not confuse rate codes 20, 7, 14, 901, 902, or 903 with the tax letter designation in the PECR. These are different settings.

How to Determine Which VAT Rate to Apply

Torgsoft does not determine on behalf of the entrepreneur, accountant, or tax adviser whether a particular transaction should be taxed at 7%, 14%, 0%, or exempted from VAT. The tax treatment must first be established and then reflected in the software.

If All Goods Are Sold With 20% VAT

The main VAT percentage is set under Settings → Parameters → Accounting → VAT %.

If the «Apply VAT by Product Type» switch is disabled, Torgsoft takes the VAT rate from the general VAT % field rather than from individual product type settings.

This approach is suitable when the same rate applies to the entire relevant product range. If a store sells goods subject to 20%, 7%, and 14% VAT, the rates must be configured by product type.

How to Configure Different VAT Rates by Product Type

Open Settings → Parameters and enable «Apply VAT by Product Type». Torgsoft will then use the VAT settings of the product type to which each item belongs. If the switch is disabled, the software will revert to the general VAT % setting. 

Next, open Inventory Management → Product Type, select the required category, and open it for editing.

The product type contains the «Subject to VAT» parameter. It determines whether VAT applies to products of that type. If VAT does not apply, you can specify the «Reason for VAT Exemption» in the software. 

To generate tax invoices, you must also correctly set the rate code and VAT percentage in the product type record. The values must match: code 7 requires 7%, and code 14 requires 14%. The general VAT % field under Settings → Parameters → Accounting must remain set to the standard rate of 20%.

Suppose a store sells cosmetics and medical devices.

First, determine which medical devices meet the requirements for applying the 7% rate. Then set rate code 20 and VAT 20% for the regular product range, and code 7 and VAT 7% for the eligible medical products in Torgsoft.

When «Apply VAT by Product Type» is enabled, Torgsoft determines the rate according to the specific product type instead of applying 20% to the entire range.

The principle is the same: set rate code 14 and VAT 14% for the product type.

However, you must first check the product's UKT ZED code. The 14% rate does not apply to all agricultural goods, only to product categories specified in the Tax Code. dp.tax.gov.ua

Be Careful With the «Apply to All» Button

In the product type directory, the «Apply to All» button applies the current type's settings to its subordinate types. The settings of child categories may be changed or reset if they differ from those of the parent type. 

Therefore, if one subgroup uses 20% VAT and another uses 7%, do not use «Apply to All» unless you deliberately intend to change the entire category branch.

How to Configure the Zero Rate

The zero rate is not the same as «without VAT».

For exports of goods outside the customs territory of Ukraine that are genuinely subject to 0% VAT, tax invoices use code 901. For transactions within the customs territory of Ukraine subject to the zero rate, code 902 is used. zak.tax.gov.ua

Therefore, simply specifying the percentage 0 is not enough. You must correctly determine the nature of the transaction and the corresponding rate code.

For a retail store, this is usually not an everyday scenario. If the zero rate relates to exports, you should separately check whether the product falls under special export security regime rules before configuring it. svp.tax.gov.ua

How to Configure VAT-Exempt Transactions

VAT exemption should not be configured as a 0% rate.

For the relevant product type, Torgsoft uses the «Subject to VAT» parameter, and the «Reason for VAT Exemption» field is provided for exemptions. 

In a tax invoice for a VAT-exempt transaction:

• column 8 contains code 903;

• column 9 contains the specific tax benefit code;

• the document is marked «Without VAT».

The State Tax Service expressly distinguishes rate code 903 from the tax benefit code: these are two separate details. tax.gov.ua

Torgsoft supports code 903 in tax invoices and displays the «Without VAT» designation. 

Do not enter an arbitrary exemption reason or benefit code. They must be determined according to current legislation and the latest State Tax Service directory for the particular transaction.

Can Different VAT Rates Be Combined in One Tax Invoice?

Goods subject to 20%, 7%, 14%, and 0% VAT may be shown as separate lines in a single tax invoice.

However, taxable and VAT-exempt transactions must be separated: if one customer receives both VAT-taxable goods and goods whose supply is exempt from VAT, separate tax invoices must be issued. ZIR

When an LLC and a Sole Proprietorship Operate in the Same Database

A common situation is when the same product range is recorded in one database, but some sales are processed through a VAT-registered LLC and others through a Sole Proprietorship that is not VAT-registered.

Current versions of Torgsoft provide the «VAT Payer» parameter under Settings → Enterprise for this purpose.

The parameter has three states:

• Yes — goods in fiscal receipts generated from this enterprise's documents are subject to VAT at the rate set for their product type;

• No — goods in this enterprise's fiscal receipts are not subject to VAT;

• not specified — the enterprise does not override the standard logic, and VAT is determined by the product type.

This parameter also affects VAT calculations in invoices, delivery notes in the «Sales With Invoice Issuance» mode, and delivery notes in consignment sales. 

For example, if a product belongs to a type with a 20% VAT rate, you can set «VAT Payer: Yes» for the LLC and «VAT Payer: No» for the non-VAT-registered Sole Proprietorship. The product record, barcode, and stock balance remain shared.

Setting an enterprise to «Yes» does not mean all its goods automatically receive a 20% rate. The specific rate — 20%, 7%, or 14% — is determined by the relevant product type settings (if Apply VAT by Product Type is enabled).

The Torgsoft parameter also does not establish an enterprise's legal status. The actual status of each Sole Proprietorship or legal entity must be reflected in the software.

VAT in the PECR

Configuring taxes in the PECR and determining the rate for a product are different tasks.

For each PECR, Torgsoft displays the list of taxes it can process. This list does not determine which tax applies when a specific product is sold. The product tax is set under Inventory Management → Product Type → Subject to VAT. 

If you need to add a tax to the PECR, the «Tax» form allows you to specify:

• name;

• letter designation;

• percentage;

• tax type — VAT or excise duty.

The letter designation is set in the tax's own settings, so do not rely on a universal rule such as «A always means 20%, B means 7%». Check the actual settings of the specific PECR. 

If a store starts selling goods subject to a new rate, such as 7%, check both levels: the corresponding tax in the PECR and the rate and code in the product type.

VAT in the Goods Receipt Document

Configuring VAT for sales and adding VAT to the purchase price are different operations.

The goods receipt document contains the specific parameter «Add VAT to the Product Purchase Price».

If the supplier states a purchase price excluding VAT, you can enable this switch. The user enters the price without VAT, and Torgsoft adds the tax to calculate the purchase cost including VAT. The subsequent markup is calculated from the resulting purchase cost. 

If the supplier has already provided a VAT-inclusive price, do not enable this switch; otherwise, VAT will be added a second time. 

The calculation uses the value under Settings → Parameters → Accounting → VAT %. Therefore, the «Add VAT to the Product Purchase Price» switch should not be treated as an automatic way to determine the rate for a particular product.

There is also a «Round Purchase Price in Goods Receipt Document» parameter. When enabled, for documents with «Add VAT to Purchase Price» selected, the supplier's price is rounded to kopecks during calculation. 

How to Prepare Torgsoft for Generating Tax Invoices

Before generating tax invoices, check the basic requirements:

1. Under Settings → Parameters → Accounting → VAT %, set the standard rate to 20%.

2. If different VAT rates (20%, 14%, 7%) apply to goods, you need to:

• Enable «Apply VAT by Product Type» under Settings → Parameters.

• Specify the rate code and VAT percentage in the relevant product type records (for example, 7% for code 7 and 14% for code 14).

Tax invoices are available under Document → Tax Invoice Accounting. On the «Tax Invoice» tab, you can select one or more documents.

Torgsoft supports saving in XML format for M.E.Doc. For export using the government standard, including work with Art-Zvit, a separate «Export Tax Invoices in Government Standard Format» setting is used. For this export, the enterprise record must contain the required details, including the taxpayer's EDRPOU code and tax office. 

If a product requires additional tax invoice details, they can be added to the product type via Inventory Management → Product Type → Edit → Dynamic Product Characteristics → Add Parameters From Template → Ukrainian Tax Invoice Parameters. 

These parameters include, among others, an imported goods indicator and a service code under DKPP. Enter them only when relevant to the specific product or transaction.

If VAT Is Not Calculated as Expected

Check «Apply VAT by Product Type». If the switch is disabled, Torgsoft uses the general VAT % field. This setting is one of the common reasons for questions about incorrect VAT calculation. 

Check which enterprise is used in the document and its «VAT Payer» parameter. «Yes», «No», and an empty value affect the calculation differently. 

Check the «rate code + percentage» combination in the product type. Code 7 must correspond to 7%, and code 14 to 14%. Also check the general VAT % field, which must be 20% for the standard rate. 

Check the tax treatment. Codes 901 and 902 indicate the zero rate; 903 indicates VAT exemption. Code 903 also requires the appropriate tax benefit code. zak.tax.gov.ua

Also check the tax list for the specific PECR, including the percentages and letter designations. The product VAT rate and the available PECR taxes are two separate levels of configuration. 

Check whether the «Apply to All» button was used. It propagates the parent type's settings to its subordinate types.

Check «Add VAT to the Product Purchase Price». If the supplier's price already included VAT, it must not be added again. 

Quick VAT Configuration Procedure

1. Determine the tax treatment of the transaction: 20%, 7%, 14%, 0%, or VAT exemption.

2. Determine the rate code: 20, 7, 14, 901, 902, or 903. For an exempt transaction, separately identify the current tax benefit code.

3. If the product range includes different rates, enable Settings → Parameters → Apply VAT by Product Type. Under Accounting → VAT %, keep the standard rate at 20%.

4. Under Inventory Management → Product Type, check the VAT status, rate code, percentage, and exemption reason, if applicable, for each required category branch.

5. If different Sole Proprietorships or legal entities operate in the same database, check Settings → Enterprise → VAT Payer for each enterprise.

6. If a PECR is used, check whether all required taxes are listed and whether their percentages and letter designations are correct.

7. If the supplier provides a VAT-exclusive price, separately check the «Add VAT to the Product Purchase Price» parameter in the goods receipt document.

8. After configuration, test a real working scenario: create a sale, check the receipt, and, if the enterprise uses tax invoices, generate a tax invoice for every rate used by the business.