How to Set Up Ad Spend Tax
Updated October 2, 2026
Ad platforms such as Meta, Google or TikTok often charge VAT or sales tax on your advertising. Ad spend tax separates that tax from your ad spend and reports it in the Tax row, as a cost or, if you reclaim it, as a credit. You set it per ad account.
- Where
- In the sidebar: Store settings > Tax & VAT, section Ad Spend Tax
- Who
- Shops whose ad platforms charge VAT or sales tax on advertising
- Time
- About 5 minutes, with one invoice per ad account at hand
- Updates
- Saved on every change. The dashboard uses the new values the next time it loads, for all past periods
If your invoices use the reverse charge mechanism (common for EU businesses that gave the ad platform a VAT ID), the platform charges no VAT and your spend contains no tax. Leave the feature off, or enter a rate of 0 for that ad account.
Turn On Ad Spend Tax#
Then fill in the row of each ad account.
In the screenshot, the Facebook Ads account is billed with 19% tax that is included in the imported spend and reclaimed. The Google Ads account is billed 19% on top of the imported spend, and that tax is not reclaimed.
There is no Save button and no default for the whole shop: each field is saved as soon as you change it, and each ad account is set on its own.
The list only appears when at least one ad account is connected to the shop. If you see only the switch, connect an ad platform first. See Connect Facebook Ads.
What Happens Next#
- Nothing is recalculated in the background. The dashboard applies the settings each time it loads, so all past date ranges change too.
- With the method Tax-inclusive (gross down), Ad Spend on the dashboard drops to its net amount, and ROAS (revenue divided by ad spend) rises accordingly.
- The tax appears as an Ad Spend Tax line inside the Tax row, with one line per ad platform below it.
- Tax of accounts that are not Reclaimable also lowers Subtotal and Gross Profit, because the Tax row sits above them.
- Your billing with the ad platform is not touched. Only the way Profitario reports the amounts changes.
The Settings per Ad Account#
Rate. Default: empty. Between 0 and 100, with up to two decimals. No tax is calculated for an account with an empty rate or a rate of 0. Use the rate printed on that account's invoices.
Method. Default: Tax-inclusive (gross down). It tells Profitario whether the imported spend contains the tax.
| Method | Your imported spend | Tax | Example at 19% |
|---|---|---|---|
| Tax-inclusive (gross down) | Already includes tax | spend × rate ÷ (100 + rate) | $119.00 imported: $19.00 tax, Ad Spend shows $100.00 |
| Tax-exclusive (net up) | Does not include tax | spend × rate ÷ 100 | $100.00 imported: $19.00 tax, Ad Spend stays $100.00 |
To find out which one applies, compare an invoice with the spend the platform reports for the same period. If the reported spend equals the invoice total including tax, choose Tax-inclusive (gross down). If the tax is added on top of the reported spend, choose Tax-exclusive (net up).
Reclaimable. Default: off. Off: the tax is a cost. It raises the Tax row. On: the tax is a credit. It lowers the Tax row, because the tax you paid to the platform reduces what you owe the tax authority. Turn it on if your business is VAT-registered and reclaims this tax in its tax filings.
Only turn on Reclaimable when you actually reclaim the tax. If you cannot, the tax is a real cost and the switch would overstate your profit.
Worked Example: The Six Setups#
The same shop in every setup: $1,000 revenue (including $50 output VAT), $400 product costs, and advertising that costs $100 net plus $19 tax at 19%. There are no other costs.
| Setup | Ad Spend | Tax row | Net Profit | ROAS |
|---|---|---|---|---|
| 1. Off, platform reports $119 (with tax) | $119 | $50 | $431 | 8.4 |
| 2. Off, platform reports $100 (without tax) | $100 | $50 | $450 | 10.0 |
| 3. Tax-inclusive (gross down), Reclaimable off | $100 | $69 | $431 | 10.0 |
| 4. Tax-exclusive (net up), Reclaimable off | $100 | $69 | $431 | 10.0 |
| 5. Tax-inclusive (gross down), Reclaimable on | $100 | $31 | $450 | 10.0 |
| 6. Tax-exclusive (net up), Reclaimable on | $100 | $31 | $450 | 10.0 |
The arithmetic:
- Setup 1: $1,000 − $50 − $400 − $119 = $431. ROAS is $1,000 ÷ $119 = 8.4. The tax is hidden inside Ad Spend.
- Setup 2: $1,000 − $50 − $400 − $100 = $450. The $19 tax you paid is missing from your reports, so profit is $19 too high unless you reclaim it.
- Setups 3 and 4: the tax is $119 × 19 ÷ 119 = $19 (gross down) or $100 × 19 ÷ 100 = $19 (net up). Ad Spend is $100, the Tax row is $50 + $19 = $69, and Net Profit is $1,000 − $69 − $400 − $100 = $431.
- Setups 5 and 6: the $19 is a credit. The Tax row is $50 − $19 = $31, which is what you owe the tax authority. Net Profit is $450.
Net Profit counts the reclaimed tax once. In setups 5 and 6 the Tax row shows $31, but Ad Spend is already net, so profit is $1,000 − $50 − $400 − $100 = $450, not $469.
How the Tax Row Is Built#
The Tax row in the dashboard's Overview is one number made of up to three parts. Expand the row to see each part.
| Line under Tax | What it is | Effect on Tax |
|---|---|---|
| Output VAT (orders) | Tax collected on your sales, minus tax on refunds, split by country | Raises it |
| Flat rate, or a supplier name | Input VAT on product and handling costs | Lowers it. Raises it when Input VAT not reclaimable is on |
| Ad Spend Tax | Tax on your advertising, split by ad platform | Lowers it for ad accounts marked Reclaimable, raises it for the others |
A line only appears when it has a value. Example: $190.00 output VAT, $79.80 reclaimable input VAT and $19.00 reclaimable ad spend tax give a Tax row of $190.00 − $79.80 − $19.00 = $91.20.
Input VAT on product and handling costs has its own settings on the same page. See How to Deduct Input VAT From Your Costs.
Where Ad Spend Tax Appears on the Dashboard#
In the sidebar, open Dashboard and scroll to Overview. The screenshot shows the shop with the two ad accounts set up as above.
An account that is reclaimable and one that is not can be combined freely, as here. The Ad Spend Tax line always shows the cost of the non-reclaimable accounts minus the credit of the reclaimable ones.
Which Combination to Use#
| Your situation | Rate | Method | Reclaimable |
|---|---|---|---|
| Reported spend includes tax, you reclaim it | Invoice rate | Tax-inclusive (gross down) | On |
| Reported spend includes tax, you cannot reclaim it | Invoice rate | Tax-inclusive (gross down) | Off |
| Tax is billed on top of reported spend, you reclaim it | Invoice rate | Tax-exclusive (net up) | On |
| Tax is billed on top of reported spend, you cannot reclaim | Invoice rate | Tax-exclusive (net up) | Off |
| Invoices use reverse charge (no tax charged) | 0 | Either | Either |
Troubleshooting#
I turned on Enable ad spend tax, but no ad accounts are listed. No ad account is connected to this shop. Connect an ad platform first, then come back to this page. See Connect Facebook Ads.
A Rate field has a warning outline. That account has no rate while other accounts are taxed. Hover the field to read the hint. Enter the account's rate, or 0 if it is not taxed.
A warning icon appears next to Ad Spend Tax on the dashboard. Same cause: some ad accounts have a rate and others have none. Give every account a rate, or an explicit 0, and the warning disappears.
There is no Ad Spend Tax line in the Tax row. Check these in order:
| Check | Fix |
|---|---|
| Enable ad spend tax is off | Turn it on |
Every rate is empty or 0 | Enter the rate from the account's invoices |
| The taxed accounts have no spend in the range | Pick a date range in which those accounts spent |
My ROAS changed after turning it on. With Tax-inclusive (gross down), Ad Spend becomes net of tax, and ROAS is revenue divided by that smaller amount.
My Net Profit went down after turning it on. An account uses Tax-exclusive (net up) with Reclaimable off. The tax is added as a cost that was not in your reports before. This is correct if you pay that tax and cannot reclaim it.
Ad spend is missing altogether. That is not a tax setting. See Why Is My Ad Spend Not Showing or Incorrect?.
If the numbers still do not add up, contact support and send the shop name, the ad account, the date range, and an invoice from the ad platform for that period.
Limits#
- The Income Statement report does not apply ad spend tax. Its Marketing section shows ad spend as imported, and its Taxes row contains no ad spend tax.
- Ad spend tax is a calculation on your imported spend. Tax amounts from the ad platform's invoices are not imported.
- One rate applies to an ad account for all dates. A rate that changed over time cannot be entered per period.
- In a dashboard view that combines several shops, each shop's ad accounts use the settings of their own shop.
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