I did search through the Shopify forums, but still could not find an answer to this question.
We are building a B2B website based in the EU and will be selling digital goods in EU and outside EU. The issue we are facing and have not found a solution to it yet, is the following. We have enabled the "Charge EU Digital Goods VAT Taxes" option and it is working as expected - adds the tax amount depending on the country of the buyer selected in the billing address. However if the buyer is also VAT registered and have a valid VAT, tax should not be added by EU regulation.
On the checkout process there is no way or field for customers to enter their VAT ID and when checked, if it is valid, no tax should be added to the order. As we do not have access to the checkout process, there is no way to achieve this functionality. We can add a cart attribute on the cart page and ask the customers to enter their VAT and validate it or even use the Address 2 field to ask for VAT, but there is no way to change the price of the product (in order to deduct tax) or to remove the tax added on the checkout step.
It is really a strange situation because Shopify have implemented the EU Digital Goods VAT Taxes which was introduced on the 1st of January, 2015, but the ability to enter a VAT number and remove the tax is still missing, which does not seem hard to do at all.
So I was wondering what is the solution to this issue if there is any. Having this limitation means that Shopify cannot be used for B2B ecommerce projects that are EU based and selling in EU.
Thanks in advance for any reply to this matter.
This is not just an issue for digital goods - EU rules say ANY intra EU B2B transaction should not be taxed if the customer quotes their VAT number. Shopify seems to be focused on the US, and on consumer transactions, so providing for your European B2B requirement is, I suspect, rather low on their priority list.
Yes I can appreciate their focus on the North American market. Still I cannot agree that the EU B2B VAT is not their priority because obviously they have implemented it, but have missed a very tiny but important piece. I hope someone from Shopify can shed more light on this!
Hi Kabuki Themes,
We empathise entirely! We have been battling the Shopify EU VAT issue for 5 years! You are absolutely right, Shopify does not work if you are primarily selling B2B across Europe because their treatment of VAT is incorrect/insufficient.
We sell physical products (gift boxes), not digital services and assumed they had fully addressed the digital VAT issue as the changes were high profile. It appears not!
Shopiify has chosen to interpret the VAT rules such that if you set your European country tax to zero, VAT is not charged based solely on the shipping address for the goods being outside your own country and within the EU. As you rightly say, you must additionally have the customer's VAT number in order to zero VAT.
Over the last couple of weeks we have supplied full UK government (HMRC) documentation advising Shopify of the correct implementation of the VAT rules. We figured as a Canadian based company they simply didn't undertsand them! Though frankly, this is no excuse for a company who attract merchants from all over Europe!
Their only suggestion is for us to charge VAT to all customers (we do have some non-VAT registered European customers) and create an individual customer profile account specific to each customer who is eligible not to pay VAT (because they have provided their VAT number). We haven't tried this yet but we're assuming this could work for our regular VAT exempt customers, however, this obviously doesn't work for a customer who simply comes on-line and places an order. In this instance the customer would be overcharged VAT (20% in the UK), (might not purchase because they are put off by the additional 20%), would have to contact us before they place their order so we can create a log in account, or after their order has processed to be given a credit for the VAT.
This level of manual intervention is seriously hampering our plans for further expansion into Europe but sadly, despite our best efforts Shopify will not resolve this VAT issue. Specifically collection and verification of a customers VAT number in order to legally zero VAT.
We have even told Shopify this is not an optional extra, it is a legal requirement but it has made no difference.
This was Shopify's 4th September reponse to our issue over collecting customer VAT numbers:-
In terms of making a change like this to the checkout, I understand where you are coming from, but its not something that our tax developers or checkout developers currently have on their roadmap.
I'm not holding out much hope that this will be addressed any time soon, despite numerous Fourm threads over many years from European merchants like us with EU VAT issues.
I can only assume most of Shopify's merchants are in North America or are B2C.
Our only hope is that enough B2B European merchants complain that they see fit to listen. Unfortunately it isn't until you set up your shop and realise you have no control over the checkout process that the problem becomes evident. Anyone looking to set up a B2B website with a pan European customer base should be aware of this. If anyone out there has a solution we'd be very pleased to hear from them but don't expect it to be Shopify!
After doing a lot of work on building a store on Shopify, I am now coming across this exact issue. Does anyone know if there has been any update or clarification from Shopify regarding this? If it is not possible to remove the tax added for EU business customers, Shopify simply will not work as a solution for us, since many of our customers are EU businesses and the solution described above of creating accounts for all customers eligible for no VAT would defeat the point of Shopify being an easy-to-manage, customer friendly e-commerce platform.
After having done so much work and being initially impressed, I am quite surprised that Shopify does not seem to have this capability, and disappointed and frustrated to learn that all this work might have been a waste of time!
I wish there were a positive update but sadly not! I empathise with your frustration at the waste of time to only realise this issue at the final stages and not at the beginning! We have been trying to resolve this issue for years. The bottom line is Shopify simply does not handle EU VAT implementation correctly. We have given them extensive documentation that clearly demonstates the correct and legally required treatment of EU VAT but it was no no avail, despite several weeks of back and forth e-mails on the subject. I agree entirely that their suggested 'work around' solution of creating customer accounts does nothing in offering customers a frictionless e-commerce experience. Shopify's inability to handle this aspect of transacting European orders without VAT is really hampering our expansion plans into Europe.
Please ensure Shopify know about your issue direct, I hope if there are enough complaints they may be persuaded to put this on their 'roadmap'!
I have also found myself in the same position recently - a store built and near enough ready to go - and the customer then specified this requirement. And after much searching I found that there is no solution?
What is the best way to contact Shopify about this issue? Through a partner account manager?
What have people then used as an alternative which provides this solution?
I think yes, contact them via or as a partner account manager, they may have more sway than us as individual stores. We contacted them direct via a support ticket. Our issue bouced to several people but the final response that they were taking no action on this matter was from Nathen B - firstname.lastname@example.org.
Until recently our shop was set up not to charge VAT to European customers (we are in the UK). So all EU countries were set to zero for tax. We are primarily a B2B company so most of our customers are companies not individuals, so they have a VAT number. However, this caused some issues because in order to legally zero VAT you must have the customers VAT number and Shopify has no mechanism for customers to collect this information automatically as part of the shopping card process. As a result we had to contact every customer after they had placed their order to get their VAT number. For customers who were not VAT registered we had to cancel their order, change the VAT setting on the 'back end' of the system to enable that customer to place their order again with VAT and then revise the 'back-end' again back to zero! Alternatively we had to issue a VAT invoice only! Yes, a nightmare!
We have recently changed the system and it is set to add VAT to all EU orders. If a customer has a valid EU VAT number they have to call us, give us their number and we have to set up a specific account for that customer that has the facility to zero the VAT against that customer only. Less than ideal! How many customers are going away because they can't be bothered to contact us and our pricing is 20% higher for them than it needs to be?
This revision is likely hurting our business but if we zero VAT without collecting a valid VAT number we are liable to pay the under-charge of VAT to HMRC! Our profit margin does not allow us to take this hit.
I don't know what other people are doing to get around this issue. I can only assume most shops using Shopify as a platform are selling to individuals where VAT has to be charged, or merchants are only selling to their domestic market.
Shopify seems to fail to understand that charging and accounting correctly for VAT is not a 'nice to have' facility, it is a legal requirement.
If HMRC (in the UK) discover that there is an issue with correct VAT accounting for merchants selling via Shopify we are all exposed to a VAT inspection and many merchants could find themselves liable for any under recovery of VAT.
Shopify should not be offering their platform to European customers without making them aware that their system does not currently account correctly for VAT.
Just to update on this, I did submit a help request, and the Shopify Guru replied basically to confirm what we all already know - that there is no way to automatically exempt a customer from VAT by having them provide a VAT number. He did say that he had submitted a Feature Request, and that
should our developers implement VAT exemption into the checkout you will be emailed immediately.
but if this is something you have been battling for 5 years already, it doesn't seem likely that it will happen any time soon.
What really gets me is that I knew what our VAT requirements were, and it just seems unbelievable that something so basic (and necessary for all businesses!) is not available given the amount of flexibility on offer in other areas. I agree that it's pretty bad that it's not even mentioned in the knowledge base. It looks terrible on me that I now have to go back and say that the last however many weeks of work were a complete waste of time!
At this point, unfortunately it looks like we will be finding another solution for our e-commerce needs--this is just too important an issue to have to work around with Shopify.