Thank you for pushing this through, however, It doesn't actually work for the EU. (Disclosure: I have beta access)
It does not allow us to show the tax inclusive price on the product page which is against EU regulation.
For example, if my address is in Germany, my VAT rat is 16%. I am also VAT registered in Italy which has a rate of 22%.
Product A has an inclusive price of $100.
Scenario 1: A Germany customer will see $100 on the product page and at checkout ($86.21 rev + $13.8 tax). All good.
Scenario 2: A customer from Italy comes along and sees $100 on the product page, however when they get to checkout, they will see and have to pay $105.16 (($100/1.16)*1.22). This breaks EU protocol of not showing the price including all tax on the product page. The Italy customer can now report me to the EU Commission.
This is how it should work for this function to have the desired affect (using same example as above):
1: A customer from Germany will see a price of $100 and at checkout will see the same price ($86.21 rev + $13.8 tax).
2. A customer from Italy sees a price of $100 on product page and when they get to checkout the price is $100. The product price is $100/1.22 = $82. The amount of tax payable to Italy is (($100/1.22)*0.22=$18). That way you show the tax inclusive price on the product page and at checkout. You have no issues with EU regulation and everyone is happy.
3. A tax exclusive country will pay $86.21 ($100/1.16) at checkout as the home's base tax rate does not apply.
You just need to make a slight modification to your current beta implementation formula. If you do so, you will comply with all EU regulation and all EU customers will finally be happy.
Please share the above calculations with your development team.
The alternative is if the product page price changes based on customer IP address. If this is done, your calculations are ok as the product page price will be the same as checkout.
I look forward to hearing from you. You can switch the above examples with the UK, or any EU country.
Thank you for your feedback and detailed breakdown of the issue. My understanding is that whilst this initial release allows customers to see the correct prices with the appropriate taxes at checkout, the issue you have raised is a known one and is something being worked on by our development team at this time. My colleague Cole also posted about international pricing in another thread:
We are working hard on adding other global selling capabilities in addition to the above, and you will see more things around managing international pricing and import duties / taxes in 2021 as well.
This is a topic I am personally paying close attention to, and I will continue to provide any updates here when I have them. I have also gone ahead and shared your comments with our development team as merchant feedback plays a large part on how we develop and build features for the platform. Thanks again for providing this information to me here.
Victor | Shopify Social Care
Hi, according to the new UK rules, the VAT collect applies when you sell for a value less then 135£. In this case a 20% vat has to be shown in the cart and in the invoice. If, instead, you sell for more than 135£, the VAT must not be collected. So, I have activate the new Shopify UK VAT COLLECT system and to see if that works I made a simulation and put in our cart a product worth 165Euros which is more than 135£. I would so have expected the VAT to be zero (because according to the UK rules, no VAT has to be collected), but instead a 20% VAT was shown in the cart. Does that mean that Shopify UK VAT collect system does not apply the 135£ rule? Is that a mistake?
It's quite confusing. I am reading over the Internet. I cannot understand if the distance-selling threshold of 70000 pounds turnover which currently applies will continue to apply or not after 01.01.2021. If it does, if your yearly online sales turnover into UK is less than 70000 pounds, then there is no need to apply for a UK VAT number. But, in such a case, what about the invoice? Should VAT amount be in the invoice or not. ?And does the 135 pounds threshold applies or not ? Very confusing!!!
@Stefano555 I have been trying to raise this issue on another thread. Bear in mind that you will need to be registered for VAT in the UK and complete a UK VAT return to collect the tax and you'll have to decide whether the additional admin is worth it. If you aren't registered with the UK tax authorities then as far as I can work out you won't be able to accept orders under £135 (I'm not 100% sure if this £135 is including or excluding taxes, presumably excluding).
For those of us in the UK the same will apply from July 2021 when selling into the EU.
As far as I can tell, Shopify are unaware of or are just ignoring this issue. I don't think the recent changes to the tax settings can handle the flexibility that is required.
Hi Robs. I am glad I am not the only one to have noticed this issue. It think it is very easy for Shopify to fix it. But if Shopify doesn't, there is no way for us, users,to fix it. That would mean that the checkouts and invoices of out-of-UK-onlineshops selling into UK will not be compliant with UK rules. Infact, at the moment, Shopify does not allow to apply UK VAT on sales lower than 135£ and to exempt VAT on sales greater than 135£ .
Regarding the UK VAT registration required for sales into UK lower than 135£, I still do not understand if the yearly 70000£ distance-selling thresholds applies or not. If it does, there is no need to have a UK VAT number below an yearly turnover of 70000£ online sales. If it does not apply, then that would mean that if, to make an example, your annual average sales are only 100£, then you have to register for a UK VAT and transfer 20% of your 100£ sales to the UK tax office. Which is quite crazy!!!