Defining the VAT level according to the legislation of your country happens in the Shop settings.
Under the General -tab in the Shop settings, simpy scroll down to the VAT Settings section and add as many VAT levels as needed. If all your products and services use same VAT level, it is enough to define only one VAT level. If some of the products or services have different VAT levels, it can be useful to add descriptions after the specific VAT level.
After you're done with creating all the needed VAT levels, simply click save.
Next: Choosing the right currency