I'm looking at replacing a custom ecommerce system for a UK business client with Shopify but although I've crawled through the forum and emailed Shopify support, I can't see how their tax calculation can be handled, and presumably this applies to loads of other UK and EU businesses.
The tax applied is dependant on the purchaser's BILLING address and the rules are
1. If the billing address is in the UK the tax is 20%.
2. If the billing address is in the UK and the client has provided a valid VAT number, there is no tax paid.
3. If the billing address is elsewhere in the world, no tax is paid.
Has anyone managed to handle this? And if so, how?
The idea scenario for me would just to be able to write a replacement tax calculation routine, but no idea if that is possible.
Jamie here from Shopify. Great question! Taxes are typically charged on shipping address rather than billing address. This is pretty standard. To give you a reference, Amazon behaves the same way - see link.
1. This is relatively straight forward. You will want to make your tax rate for the UK %20. This will cover all orders that are shipped to the UK. This doc goes into more detail.
2. You can use a tax exemption to remove taxes for your B2B customers that provide a VAT number. This doc goes into more detail.
3. You can take off taxes for rest of world using the manual tax settings referenced in step 1. This doc has a neat little customization you can use to integrate VAT into your prices for your local customers and show a price without VAT for international customers.
I hope that helps! If you have documentation showing that you need to tax based on billing address give us a shout - firstname.lastname@example.org :)
You certainly can use the same customizations to charge taxes for your domestic customers and no taxes for international customers. Whether you **should** charge your taxes this way can vary based on industry, region, customer type etc. It's typically best to speak with a tax professional in your area to confirm the rates you need to charge moving forward.
Hi, I have been using Shopfy for some time based in the UK. I'm afraid Shopify has never been properly adapted to 'handle EU VAT rules, and Jamie's guidance on handling thes eissues are rather less useful than he suggests.
To recap basic EU VAT rules: if you're UK based, you charge UK VAT rates (normally 20% unless a product is VAT exempt or the rare 5.5% cases) to all consumers and non-VAT registered businesses across the EU. The rate charged should be UK rate, no matter that you may be, for example, shipping to France where the local VAT rate is 19.5%. (Note there are now however different provisions for sales of non-physical products - eg downloads - across EU borders )
Where you are shipping to a VAT-registered business, you should provide teh facilityf or them to give you their VAT reg number, and then you should sell to them without charging VAT.
Where you are shipping to a customer outsiude the EU, no VAT is chargeable. You are technically free to charge the full VAT-inclusive price and pocket the VAT not charged, but this may impact your non-EU business: non-EU customers familiar with VAT rules (for example those in Guernsey & Jersey, in Norway, and many middle-eastern customers) can get pissed off, and competitors who take off the VAT will undercut you.
In terms of how you handle the above in Shopify:
I keep seeing exasperated posts from new UK customers who have just discovered these fundamental limitations - often after investing considerable effort ina site - and are amazed that Shopify lacks such basic capabilities to handle European retailing. The fact is that these issues have been known about for more than 10 years, and Shopify somehow refuses to acknowledge the issues, instead pretenting via simplistic stuff like Jamie has posted, that it isn't really a problem.
Well put Dan. How Shopify can keep ignoring this issue is totally unproffesional and shows a lack of knowledge to the taxation rules of the countries that they not only supply their product to but also register local offices with. Its unfair on CS reps to have to keep telling us there is nothing they can do, its unfair that we are expected to hire developers at our own cost to get this sorted.
Its such a basic requirement that essentially Shopify are really implying "We are fine for the Home business, but anything B2B we are not interested in", even though B2B often tends to have a higher Sales Turnover which make Shopify more profit.
I think this is also losing us sales. If someone wants to buy things for their business through us there is no exVAT price, which their accounts department would then assume we are not VAT registered which inturn would lead them to believe that they have no way of recovering the 20% when its time to submit your VAT returns,
NB. We came here from Volusion which does have this implemented and we also roadtested BigCommerce that also has this implemented. We didnt notice it was not implemented here until it was too late and the move between providers was already underway.
Im going to stop now. I feel a full blown rant and rave coming on.
many of you experience the same problem with EU VAT handling. Since Shopify still not has a proper solution for this, I decided to set up a petiotion. Maybe we can convince Shopify together. Let's unite!
We have recently created a solution to address problems with selling to VAT-registered businesses in the UK and other EU countries.
Our app allows to get and validate European VAT numbers from your customers and automatically set VAT-registered businesses as tax exempt in Shopify when applicable. This means that your business customers will not be charged VAT during the checkout.
All these features are available in our invoicing app Sufio.
We have also published a short guide that explains when Shopify stores should charge VAT when selling to consumers and businesses in the EU.
If you have any questions just let me know. Looking forward to your feedback!
-Katy from Sufio
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