VAT introduction and complications

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Tourist
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Hi,

This applies both to general VAT rules and to Shopify.

Firstly - I'd been worried about reaching the VAT threshold for a while, because like many, it means raising prices and no longer being competetive, or 'not charging VAT' (charging but lowering your base price) - so the end price to the customer is the same. Losing 20% of your revenue.

Today I realised and confirmed that sales outside the EU don't need the chargee. Most of my sales are outside the EU - great! No need to disatisfy most of my customers. I can either charge VAT to only customers within the EU, or 'not charge VAT at all', and lose 20% of revenue on EU sales only. A small percetage of my sales. Worth it to keep prices the same for everyone worldwide, and compensated by me still saving 20% on cost of goods for products that will then sell outside the EU.

THEN I found out that non EU sales do't even count toward the threshold. Puts me much further from it, as like I said, most of my sales are non-EU.

However, having pondered on it for a while, I'll do the math, but I suspect I'd benefit from early registration. Then I can save 20% on everything I buy and not have to pay it back on non-EU sales. Correct? Then I have the choice whether to charge EU customers extra or not. Which brings me to the shopify specific portion. I found a thread complaining about the function of shopify for situations like this. In it, somebody wrote about something that sounds like what I want to do to keep prices across the board the same and just take a hit on my EU sales.

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Quote:

2. The alternative, which is what we have adopted, is that you set prices inc. VAT, tick the 'my prices include VAT' box, and set tax settings for non-EU countries at 0%.  The result is that non-EU customers get charged the same inc. VAT price.  The system doesn't show a VAT component at checkout, on confirmation emails, etc. as it would for a UK/EU sale, so you aren't conning the customer by pretending VAT has been added when it hasn't. But they don't get the benefit of the reduction they would normally get for a shipment outside the EU.

This is perfectly legal - in fact, if you look at the International Delivery T&Cs for the John Lewis and M&S sites you will see both have chosen to handle VAT this way.  For example JL says  

This means that the total price you pay us for products, or JL Delivery Ltd for the delivery, is always the same, regardless of whether or not UK VAT is chargeable on the sale. 

Where you've requested delivery to a EU address, the price paid for the product and the delivery service will usually include UK VAT, which will be shown on your VAT receipts issued to you by both johnlewis.com and JL Delivery Ltd. To obtain a VAT receipt , sign into Your Orders and then click on the View your order/obtain VAT receipt link.

Where you're not a UK resident and you've ordered products for delivery by JL Delivery Ltd to a non-EU address, both the products and the delivery service will normally be zero-rated, with no UK VAT chargeable on either. However, the price paid by you for the products and delivery services will remain the same as shown on the website.

While simpler, this is of course by no means a problem-free solution - if you expect to do a significant volume of sales ex-EU, you may lose sales and risk dissatisfied international customers.

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Can somebody confirm that?

Could I simply register for VAT, begin saving 20% on my purchases, tick 'price includes VAT' on all my products Worldwide? How do I, as mentioned above, make my non-EU customers see things simply as they have been until this point- the same price, no metion of VAT anywhere. And for EU customers to see 20% of their invoice consisting of VAT, even though they paid the same as US customers?

I hope all that makes sense! Sorry for the long post.

Thanks

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