To start with the basics, Shopify VAT (Value-Added Tax) is a tax levied on the sale of products and services from your Shopify store, which the buyer indirectly pays. This means that Shopify sellers need to collect VAT from their customers at the time of sale (in checkout)<\/strong> and remit it to the respective tax authorities in their countries. <\/p>\n\n\n\n When setting up your Shopify store, it is essential to consider whether you need to charge VAT<\/strong><\/a> on your products and services if your buyers are from the EU member countries or the UK.<\/p>\n\n\n\n If your store is registered for VAT, built-in tax settings in Shopify <\/a>allow you to configure it easily. But if you’re not sure about your VAT registration status<\/strong> or want to obtain a VAT number for your Shopify business, then take a look at this article by Stripe<\/a>. Registering for VAT and charging it on your products is not a necessary step for every Shopify seller.<\/strong> Before you jump into enabling tax settings in Shopify, make sure to check if you fall under the criteria of mandatory VAT registration. Some common factors that determine whether or not you need to register are:<\/p>\n\n\n\n The VAT for EU<\/a>, non-EU, and UK-based companies is charged differently. If you’re a US-based Shopify business, and all your buyers are from the United States, then you won’t need to collect VAT.<\/p>\n\n\n\n In the European Union (EU), each member country has its own VAT (Value Added Tax) rates<\/a> and regulations. Therefore, the VAT rate you should collect depends on the specific country to which you are selling your products. For example, if you’re selling a product worth \u20ac100 to a customer in Germany, you’d also need to collect 19% VAT (\u20ac19) from them<\/strong> as per the German tax laws.<\/p>\n\n\n\n If you’re a US-based Shopify business selling products to UK citizens, then you’ll need to charge VAT at the UK’s standard rate, currently set at 20%<\/a>.<\/p>\n\n\n\n If your Shopify business is based in the EU (member states), you need to charge VAT as per the standard rate of your country (usually ranging from 17-25%<\/a>).<\/p>\n\n\n\n When an EU-based Shopify business sells products to customers in non-EU member countries, the VAT doesn’t come into play for those sales. Instead, sellers must collect the tax as per the import laws and regulations of the destination country. <\/p>\n\n\n\n If your Shopify business is based in the EU and sells products to customers in the UK, then you’ll need to charge VAT at the UK’s standard rate of 20%.<\/strong><\/p>\n\n\n\n If you’re a business established in the UK and you’re making taxable supplies of products or services, you need to charge VAT on those sales at the standard rate of 20%.<\/strong><\/p>\n\n\n\n If your UK-based Shopify business sells products to customers in any EU member country, you’ll need to charge VAT at the standard rate of that particular country<\/a>. For example, if you’re selling a product worth \u20ac100 to a customer in France, then you’ll also need to collect 20% VAT (\u20ac20)<\/strong> from them as per French tax laws.<\/p>\n\n\n\n When a UK-based Shopify business sells products to customers from non-EU member countries, VAT does not apply to those sales. The sellers need to collect taxes as per the destination country’s import laws and regulations.<\/p>\n\n\n\n Note:<\/strong> <\/strong>The VAT registration threshold for the UK in 2023 was \u00a385,000<\/a>. So if you’re a small business with less than this threshold, you won’t need to register for VAT in the UK and collect it from your customers.<\/p>\n\n\n\n The buyer-seller scenario plays a significant role in VAT on Shopify<\/strong>. If you’re selling to both B2B and DTC on your store, then there might be differences in the VAT that you’ll charge on your products –<\/p>\n\n\n\n If you’re selling your products to your B2B\/wholesale customers<\/a><\/strong>, you don’t need to collect VAT from them if they provide their valid VAT number during checkout.<\/p>\n\n\n\n Just make sure that your B2B customers have a valid VAT number so that they fall under the reverse charge mechanism in B2B transactions.<\/a><\/p>\n\n\n\n Don’t worry, we will show you how to set up tax exemptions for your EU-based customers later in this article.<\/p>\n\n\n\n If you’re selling your products to B2C customers<\/strong>, then you will have to collect VAT from them<\/strong> as per the tax rates applicable in their region<\/strong>. Later, you can remit it to the respective tax authorities.<\/p>\n\n\n\n We assume that so far, you know about how the VAT works for your type of business. Now, let’s look at how to set it up in your Shopify store based on your desired preferences.<\/p>\n\n\n\n In countries like the UK etc., you might want to include VAT in your product prices. To do this, navigate to Settings > Taxes & Duties<\/strong> in your Shopify admin dashboard, and under Decide how tax is charged<\/strong>, select the checkbox “Include Tax in Prices<\/strong>“. And hit Save<\/strong>.<\/p>\n\n\n\n Once you have configured your prices to include taxes, do make sure the Charge tax on this product<\/strong> checkbox on your product page(s) (as illustrated below) is checked. By doing so, the value-added tax (VAT) will be added to and displayed alongside your current product prices. This ensures that your customers can easily identify the total order amount, including the added VAT, during the checkout process.<\/p>\n\n\n\n To set up a local tax rate for your customers (Shopify tax settings based on your buyer’s address), simply go to Settings<\/strong> > Markets<\/strong> > Preferences<\/strong> > Taxes<\/strong> and enable it<\/strong> as shown in the image below.<\/p>\n\n\n\n Also, if you want to do it manually for specific countries in the EU, then follow this <\/strong><\/p>\n\n\n\n (Note: Do this if the European Union is not showing in your Taxes and Duties section)<\/p>\n\n\n\n <\/em>Go to Settings<\/strong> > Shipping and delivery<\/strong> > General shipping rates, <\/strong>click on the ‘>’<\/strong> icon to add and collect taxes from selected countries.<\/p>\n\n\n\n Now, you can select multiple products that you want to ship to respective countries and add their local taxes or collect taxes from the customers directly from your store.<\/p>\n\n\n\n To do this, click on Create zone<\/strong> as shown image below –<\/p>\n\n\n\n Now, add a market (for example: Sweden) as shown in the image below and hit Done<\/strong>.<\/p>\n\n\n\n Now, Save<\/strong> all the changes.<\/p>\n\n\n\n After that, head to your Tax settings and you’ll see the European Union<\/strong> option added to the taxes and duties section (shown in the image below).<\/p>\n\n\n\n Now, click on the Collect VAT<\/strong> button.<\/p>\n\n\n\n Here, you will see three options: ii. Micro-business exception – <\/strong>Select this if your business makes less than 10,000 Euros of sales in EU countries to be exempt from VAT and only want to submit a domestic VAT return.<\/p>\n\n\n\n iii. Country-specific registration –<\/strong> Select this if you want to submit a VAT return in each EU country that you ship to.<\/p>\n\n\n\n In our case, let’s choose Country-specific registration<\/strong> and click on Next<\/strong>.<\/p>\n\n\n\n Now, let’s choose a Country (for example: Sweden), add your VAT number, and click on the Collect VAT <\/strong>button.<\/p>\n\n\n\n Note:<\/strong> If you need more information, you can check this help article from Shopify on collecting taxes in the EU<\/a>.<\/p>\n\n\n\n By default, in your Shopify store, the cost shown to customers in the checkout order summary includes tax. If you prefer to display the precise tax amount being paid, follow these steps:<\/p>\n\n\n\n 1. Go to Online Store<\/strong> > Themes<\/strong> > then click on … <\/strong>(three dots) button > Edit default theme content<\/strong><\/p>\n\n\n\n 2. Go to Theme content > Checkout order summary > Vat label HTML box enter Including {{amount}} in taxes<\/strong><\/p>\n\n\n\n 3. Click Save<\/strong>.<\/p>\n\n\n\n The Wholesale Pricing Discount<\/a> app is a B2B app that seamlessly integrates with Shopify Markets<\/a>. It allows you to show tax exemption for VAT and tax IDs (for B2B customers – based on customer tags, logged-in customers, and non-logged-in customers) during checkout.<\/p>\n\n\n\n Note:<\/strong> You need the Wholesale Pricing Discount app installed in your Shopify store for this setup.<\/p>\n\n\n\n As we conclude our discussion on setting up Shopify VAT, it’s important to recognize its significance. For business owners aiming to expand their reach and serve customers from EU countries, implementing Shopify VAT is crucial. It demonstrates commitment to compliance, transparency, and fosters trust with customers.<\/p>\n\n\n\n By understanding VAT complexities, you can accurately collect and remit taxes while avoiding legal consequences. With the outlined steps in this blog post, setting up Shopify VAT can be a seamless process. So, take action now and confidently sell to EU countries! Remember, staying informed and up-to-date on tax laws is an ongoing responsibility. Stay updated with any future changes that may impact your business. <\/p>\n\n\n\n Thanks for reading \ud83d\ude42<\/p>\n\n\n\n![\"manage](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/SMALL-CTAs-6.gif\")
<\/span><\/a><\/figure><\/div>\n\n\n\n
Now, let’s explore the proper way to charge VAT based on the location of your business.<\/p>\n\n\n\nWhen and when not to register for VAT?<\/strong><\/h2>\n\n\n\n
\n
VAT for US, EU, non-EU and UK-based Shopify stores<\/strong><\/h2>\n\n\n\n
Here are some use cases that’ll give you a better idea –<\/p>\n\n\n\n1. For Shopify businesses in the US<\/strong><\/h3>\n\n\n\n
A US-based Shopify business selling products within the US<\/strong><\/h4>\n\n\n\n
A US-based Shopify business selling products to customers from EU member countries<\/strong><\/h4>\n\n\n\n
A US-based Shopify business selling products to customers from the UK<\/strong><\/h4>\n\n\n\n
2. For Shopify businesses in the EU member countries<\/strong><\/h3>\n\n\n\n
An EU-based business selling products within the EU member countries<\/strong><\/h4>\n\n\n\n
An EU-based Shopify business selling products to customers from non-EU member countries<\/strong><\/h4>\n\n\n\n
An EU-based Shopify business selling products to customers from the UK<\/strong><\/h4>\n\n\n\n
3. For Shopify businesses in the UK<\/strong><\/h3>\n\n\n\n
A UK-based Shopify business selling products within the UK<\/strong><\/h4>\n\n\n\n
A UK-based Shopify business selling products to customers from EU member countries<\/strong><\/h4>\n\n\n\n
A UK-based Shopify business selling products to customers from non-EU member countries<\/strong><\/h4>\n\n\n\n
<\/span><\/a><\/figure><\/div>\n\n\n\nCharging Shopify VAT for B2B vs B2C customers<\/strong><\/h2>\n\n\n\n
I. Selling to B2B customers<\/strong><\/h3>\n\n\n\n
II. Selling to B2C customers<\/strong><\/h3>\n\n\n\n
How to set up VAT for your Shopify store?<\/strong><\/h2>\n\n\n\n
A. Include VAT in product prices in Shopify<\/strong><\/h3>\n\n\n\n
![\"Including](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.03.51.png\")
<\/figure>\n\n\n\n![\"Including](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.04.45.png\")
<\/figure>\n\n\n\nB. Include taxes based on your customer’s location<\/strong><\/h3>\n\n\n\n
![\"Including](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.05.35.png\")
<\/figure>\n\n\n\n![\"Including](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.06.31.png\")
<\/figure>\n\n\n\n![\"Setting](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.07.38.png\")
<\/figure>\n\n\n\n![\"Shopify](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.08.48.png\")
<\/figure>\n\n\n\n![\"Setting](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.09.38.png\")
<\/figure>\n\n\n\n![\"Collect](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.10.33.png\")
<\/figure>\n\n\n\n
i. One-Stop Shop registration –<\/strong> Select this if you want to submit a single VAT return for all EU countries that you’re selling to.<\/p>\n\n\n\n![\"Country](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.11.25.png\")
<\/figure>\n\n\n\n![\"Setting](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.12.11.png\")
<\/figure>\n\n\n\n<\/span><\/a><\/figure><\/div>\n\n\n\nc. Display\/Add VAT information on checkout<\/strong><\/h3>\n\n\n\n
![\"Setting](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.12.50.png\")
<\/figure>\n\n\n\n![\"Viewing](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.13.44.png\")
<\/figure>\n\n\n\n<\/span><\/a><\/figure><\/div>\n\n\n\nAdding VAT option in checkout using Wholesale Pricing Discount app<\/strong> <\/h2>\n\n\n\n
![\"Wholesale](\"https:\/\/wholesalehelper.io\/blog\/wp-content\/uploads\/2024\/03\/Screenshot-2024-03-29-at-16.14.25.png\")
<\/figure>\n\n\n\n\n
Conclusion<\/strong><\/h2>\n\n\n\n