Removing tax for international orders from UK

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Shopify Staff
Shopify Staff
577 51 139

Hi @TimothyCann,

I'll just clarify how our existing tax system works and how things would work if you no longer need to charge EU merchants VAT as of January 1st, 2021.

If you have a £100.00 product that is tax-inclusive with a VAT rate of 20%, then a customer due to pay tax will see a tax charge of £16.67 when they checkout. However, if you have a customer based in a country who is not due to pay taxes, then they will still pay the £100.00 but at a tax rate of 0%. Both customers pay the same price, but only one is paying taxes on the product.

I am not completely literate on what the tax implications will be when it comes to selling to EU customers from the UK as of 1st January, 2021, but you will be able to adjust your tax settings in Shopify on this date to no longer collect taxes from EU-based customers from this point, if indeed you are charging VAT to EU-based customers at this time.

If VAT is due to be charged to the customer when the goods enter the EU (along with any respective duties), then this setup will ensure that the customer is not paying VAT at the time of purchase, whilst you continue to charge VAT to your customers in the UK.

Kind regards,

Victor | Shopify Social Care

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Shopify Partner
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If VAT is due to be charged to the customer when the goods enter the EU (along with any respective duties), then this setup will ensure that the customer is not paying VAT at the time of purchase, whilst you continue to charge VAT to your customers in the UK.

I'm sorry but I'm not sure I follow your logic here. From the customer's perspective they are paying VAT at the time of purchase, the fact that you don't show it as such at the checkout is irrelevant to them, they are buying a product from a UK store with a price that is quoted as inclusive of UK VAT. They pay the exact same price as a UK customer would pay and then from next year they may have to pay additional taxes when it reaches their country.

I don't understand who this setup would actually be useful for.

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Excursionist
19 0 4

Hi Victor, thanks for trying but I'm sorry mate you don't seem to understand how value-added tax works.

Each country can have its own VAT. In Australia we call it Goods and Services Tax and it's 10%. In New Zealand, next door, it's 15%.

When I sell to a domestic customer, I need to charge Australian VAT. When I sell to an international cusotmer, I do not need to charge Australian VAT. And then, depending on the international country, I might need to charge a tax specific to that country.

Some countries drive cars on the right (like the US), and some countries drive cars on the left (like Australia). And some countries quote prices excluding VAT (like the US) and some countries quote prices inclusive of VAT (required by law).

Shopify accomodates this with two modes: "My prices exclude VAT" and "My Prices include VAT". And this works fine for domestic sales.

However, when it comes to international sales, if you are running in "My Prices include VAT", then when you sell to an international customer you do not need to charge local VAT, and you need to remove the local VAT from the price. This is where the coding error is in Shopify. Shopify does not remove the domestic VAT from the export sales price.

In your UK 100GBP example, the price excluding 20% VAT = 83.33GBP export price. But Shopify says is 100GBP!

I know everyone in the Shopify team are all busy counting their options and looking through Ferrari brochures, but I would be really grateful if you could escalate this critical to the most senior person you can find. It is really a very small coding error to fix.

thanks

Andrew

 

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Shopify Staff
Shopify Staff
577 51 139

Hi @WoodyBrighton,

Thank you for your detailed explanations. I am aware that whether or not you charge taxes depends on the customer's location, and that the amount of tax charged (if any at all) is dependant on the country or region that the customer is based in.

What I was trying to explain was that irrespective of whether or not the customer is due to pay VAT or any form of sales tax on an order, when you list prices as tax-inclusive on the Shopify platform the customer will pay the tax-inclusive price regardless. If they are due to pay tax then they will see the relevant tax rate and the amount of tax charged—e.g. at 100 GBP price and a VAT rate of 20%, the amount charged in tax will be 16.67 GBP. If they are not due to pay VAT, then they will still pay the 100 GBP price, but at a 0% tax rate. The value of the order is not reduced because the customer is not paying VAT.

I recognize that this is not the best setup for merchants selling abroad to customers who do not need to pay tax, and wish to offer them cheaper prices as a result. Workarounds for this include setting prices to be tax-exclusive, so customers due to pay VAT will have the tax added on and customers not due to pay VAT will pay the tax-exclusive price, or using apps that allow for multi-country pricing such as this one. If you set prices to be tax-exclusive but are mandated by law to show tax-inclusive prices on the storefront as well, we have a guide that provides information on how to edit your theme's code to display these prices as well.

Nonetheless, I appreciate that having the default option of allowing customers not due to pay tax to pay a cheaper price for your products would be beneficial and important when selling abroad. I will be sure to submit your feedback to our development team and detail why this change would be helpful to you and many other businesses as well.

Kind regards,

Victor | Shopify Social Care

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Excursionist
19 0 4

Hi Victor,

Can you please provide an update on fixing this error in Shopify?

thanks

Andrew

 

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New Member
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@Victor Please let us know about the possibility of the default option of allowing customers not due to pay tax to pay a cheaper price for products, it's important when selling abroad B2B.

Regards John

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Shopify Staff
Shopify Staff
577 51 139

Hi @johnwinckel,

Thank you for reaching out about this. At this time, it is not possible to set two different price points for a product (i.e. one including tax, and one excluding tax) when you have enabled the option to list prices with taxes included enabled in Settings > Taxes. If you have this option enabled, customers who are not due to pay tax will still pay the full price of the product, but with the tax rate set to 0%.

If you wish to set lower prices for customers in countries where you do not require them to pay tax, you can use an app such as Multi Country Pricing to gain greater control over your prices in different locations. Alternatively, you could instead set your prices to not include taxes by default, and have them added on at checkout—this means tax-exempt customers would pay the pre-tax price, and customers who are required to pay tax will still do so when they complete their checkout. If you are required to also show the tax-inclusive price on your product pages, we have a guide on how you can edit your theme's code and add these prices here.

Kind regards,

Victor | Shopify Social Care

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 - Was your question answered? Mark it as an Accepted Solution
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New Member
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Hi,

 

"customers who are not due to pay tax will still pay the full price of the product, but with the tax rate set to 0%" --- I honestly can't believe what I am reading. It is the most absurd thing I have ever heard. It is dishonest towards the customer not to say a deception.

 

I almost signed up for a subscription, LUCKILY I didn't just yet, and after reading this thread I surely will not. Bye Shopify - you made a clear point of why I shouldn't start building my shop here. So thankful I stumbled on this topic. Next stop - Wordpress.

 

Best regards,

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New Member
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A 130 billon worth company can't make simple taxes calculation. We will probably move to big commerce.

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