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:
- Shopify allows you to set up a tax rate to be charged by country. So you set up 20% for every EU country (I'm afraid you have to go through every country listed and be clear which countrioes are and aren't in the EU - for example Jersey, Guernsey, Norway aren't, even though you might think they are). You set up 20% for the rest of the world.
- Now comes the tricky bit. Shopify also allows you to choose whether your product prices are inclusive or exclusiove of tax. You might think, given that prices in the EU are generally displayed inc. VAT (unless you're a pure business-business site), you would choose the "my prices include taxes" option. The only problem with that Shopify then interprets it as that you charge the same price everywhere, even for customers outside the EU. So you are forced to charge inc VAT prices even for such customers: the only way to not charge VAT is to refund the VAt element manually after an order is placed.
- There is a way round this. You can choose "my prices don't include taxes" in settings and Shopify will then add on VAT for customers within the EU, butnot those outside. The catch is that you then have to enter ex-VAT prices into Shopify for each product, as it will add on the VAT. And if your site is a consumer site where product prices have by law to be displayed inc. VAT, you must get your theme adapted to add in the VAT whenever a price is displayed - eg on product & collection pages, in the basket, etc. Also, since you are starting with ex-VAT prices in teh system which will generally be strange numbers (eg £10 inv VAT price equals £8.33333... ex-VAT, you will get funny rounding issues on prices when displayed, and in totals across multiple products at checkout.
- Now for the business-to-business case. Jamie's solution of tagging a customer as non-taxable wiorks if you have a few regular customers for which you set up records beforehand. It DOESN'T work for the more likely case where customers are coming in on-line for the first time, and just want to enter their details and order. Because (a) flagging a customer s non-taxable is a manual process, and (b) there is no mechanism to capture a customer's VAT number within Shopify. And unfortunately the sections of Shopify dealing with checkout where customer details are entered, aren't tailorable in the way that most other aspects of Shopify can be tailored via a theme.
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.
Sorry!
Dan
