Default tax rates

The most commonly used tax rates are already set up in Xero.

View and enter your own tax rates

How and where are tax rates used?
  • Each line item you enter in Xero (whether these are items on sales invoices you are sending to customers, bills you are receiving from suppliers, bank transactions to record money you have spent or received, manual journals or expense claims) has a tax component.

  • The basic tax rates provided by default are a sales tax rate for purchases, for sales and for items that attract no tax.
  • The default rates are all set to 0% by default and at the very least you can change this percentage to match the rate required by your country for sales and purchases.
  • The 'Accounts using this Tax Rate' column refers to the accounts in your chart of accounts that will use these rates by default. This means that whenever you 'code' a transaction to a particular account, for example, Sales, a preset tax rate will be applied automatically. Click on the number of accounts using a tax rate to see all the accounts in the chart of accounts that are using that rate. The padlock icon shows on locked tax rates, which can't be deleted. A locked rate will be currently in use in your organisation, either as a default rate on one of your accounts, or on a repeating invoice or bill.
  • If you don't want to use the default tax rates, you can create your own and apply them as the default for accounts in your chart of accounts. You can use any Tax Rate on any invoice, bill or transaction regardless of whether it is the default rate on an account.
  • The only tax rates that you can't change or delete are:
    • Tax Exempt rate which is used by the Xero system accounts.
    • Sales Tax on Imports which is a special rate used for reporting sales tax that you want to record as being fully refundable. You can see all transactions for a period broken down by tax rate on the Sales Tax Audit.
  • In the chart of accounts you can choose if you want your tax rates to be the default tax rate on certain accounts so that that amount of tax is calculated on a transaction whenever the account is used.
  • If you want to import a chart of accounts from a CSV file, you need to make sure you have all the tax rates you want to use set up before using them in the file you import. If the tax rates on an imported file can't be found in Xero, they'll default to 'Tax Exempt (0%)'. You can update the rates on accounts later in the chart of accounts when you've set up the required tax rate.