How will Shopify accommodate the new EU 2021 VAT Rules for E-commerce from 1 July?

Ryan_O_Reilly
New Member
2 0 2

Shopify has outlined the upcoming EU VAT changes here https://www.shopify.co.uk/blog/eu-vat-changes-2021 along with the requirements and options for sellers. However, there is no mention of ongoing work at Shopify to facilitate these changes for sellers and when new features/updates will be released. 

From 1 July, shops selling into EU countries above the new distance selling threshold (€10K) will be required to collect VAT at the destination country's rate. For sales <€150 this can be done via the simplified OSS system outlined in the link, removing the necessity to register for VAT at each destination,  but for sales >€150 the seller must either be registered for VAT at the destination country, or not charge VAT and have import VAT charged to the customer by their shipping partner, including brokerage charges etc. 

For small businesses with orders over the €150 threshold it may not be viable to register with each jurisdiction, with the second option of not charging VAT to these customers being the preferable route, however this creates a problem for configuring Shopify's tax options. 

At present, Shopify offers the binary option for collecting VAT based on customer location. The upcoming changes and option outlined above would necessitate creating a two-tier, order total based system whereby VAT is charged at local rate to EU orders >€150 and not charged to orders >€150. The present options within Shopify would cause double taxation on the latter with customers charged VAT at checkout and again on import. 

Does Shopify have these updates in development, and if so, when will they be available?

ajmarriage
Tourist
10 0 0

Bumping this up - it would be great to get a response here

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Shay
Shopify Staff
Shopify Staff
276 60 57

Hi @Ryan_O_Reilly and @ajmarriage 

Thank you for sharing your questions about the new tax law changes coming to the EU and how this is going to affect your Shopify businesses. Our tax support team has released some updates about how we are incorporating this change into our system and you can read more about that here:

One-Stop Shop schemes

Starting July 1st, 2021, One Stop Shop schemes are available that allow merchants to simplify charging and remitting VAT for sales to EU member states.

  • The One-Stop Shop (OSS) scheme, also called the Union OSS, is for merchants within the EU whose sales to other EU member states require them to charge and remit VAT based on destination countries. After July 1, 2021, you can use the OSS scheme if your annual sales to all other EU member states are equal or greater than 10,000 EUR.

    If your annual sales to all other EU member states are less than 10,000 EUR, then you can either use the micro-business exemption to charge your local VAT rate, or register for the OSS if you want to charge VAT based on the location of your customers.

  • The Import One-Stop Shop (IOSS) scheme, also called the Non-Union OSS, is for merchants outside the EU that sell to customers located in any EU member state. After July 1, 2021, you can use the IOSS scheme if you are located outside the EU and sell to customers located in an EU member state, and you don't want your customers to be charged tax upon delivery.

    Using IOSS, you can choose to collect VAT on orders equal to or less than 150 EUR at checkout so that your customers don't pay taxes upon delivery.

 

While we are not able to tell you what tax rates you need to have setup or what you need to be charging your customers in taxes, we can assist you in setting up this new feature once it becomes live on July 1st. If you have any additional questions about this please don't hesitate to let us know. 

-Shay

Shay | Support Advisor @ Shopify 
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Ryan_O_Reilly
New Member
2 0 2

After four weeks I'd hoped for more information on the updates Shopify is making to accommodate the new tax rules rather than much the same information I'd linked in my original post. 

I don't need to know what tax rates to charge, how to set this up on the existing system or how to report this to OSS/IOSS, I need to know how Shopify will allow for the changes required by the last paragraph of your quote:

"Using IOSS, you can choose to collect VAT on orders equal to or less than 150 EUR at checkout so that your customers don't pay taxes upon delivery."

Correct me if I'm wrong, but if you choose this route as I am likely to, and even if you have all EU tax rates set up correctly in line with the new rules, there is no option within the current Shopify system to carry this out. Again, it will require a way to charge VAT based on sale total (ie. on orders <€150, not on orders >€150) rather than simply th binary option of charging tax or not based on customer location. 

Can anyone confirm this necessary option will be available in time for the change on 1 July?

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Shay
Shopify Staff
Shopify Staff
276 60 57

HI Ryan! 

I reviewed the information in our Help Center and also connected with out Tax Support team regarding your concerns and I have an answer to this question: 

"... it will require a way to charge VAT based on sale total (ie. on orders <€150, not on orders >€150) rather than simply th binary option of charging tax or not based on customer location. 

Can anyone confirm this necessary option will be available in time for the change on 1 July?

 Yes, this will be integrated into our system as long as your business is registered to collect taxes in the EU. Similar to how our current setup allows this, you provide your registered business tax ID and registration for IOSS through your store admin under Settings > Taxes and appropriate thresholds will be put in place based on your tax registration. 

I appreciate your feedback on this topic and I will provide that to our team who develop or Help Center documentation to see if we can get some better clarification on this. Thank you!

-Shay

 

Shay | Support Advisor @ Shopify 
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SMU
Excursionist
19 0 33

Unfortuantley there are no easy solutions, unless someone can elighten me. Royal Mail have recommended Taxamo Assure as they simply charge a flat fee of £2 per parcel and they submit the VAT return and you use their IOSS number. However, nothing like this has been made available for UK merchants to integrate on their shopify platforms. Taxamo do offer the option to build a custom integration into shopify but you would need a developer to do this for you, if like me, you don't know how to do this. 

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CA75
Tourist
3 0 0

Hi, 

Can you let me know how you will be treating Northern Ireland. Currently there doesn't seem to be an option for NI within the micro business exemption?

Thanks

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Shay
Shopify Staff
Shopify Staff
276 60 57

Hi @CA75 

That's a great question! You are correct that the micro business exemption for Northern Ireland is not yet available. 

At this time, you can charge Irish VAT (rather than destination VAT) if you qualify for the micro-business exemption. Changes to the UI are coming soon to support this change. This is because Northern-Ireland has a dual-status in relation to the EU, making it a more complex special case that we have had to design for.

When Northern Ireland merchants ship to the United Kingdom, which they are a part of, they are treated as domestic merchants. When they ship to any of the 27 countries in the EU, which the UK is not part of, they are also treated as domestic merchants.

Rest assured we will be notifying you via email when these settings are available in the admin.

Thank you!

-Shay

 

Shay | Support Advisor @ Shopify 
 - Was my reply helpful? Click Like to let me know! 
 - Was your question answered? Mark it as an Accepted Solution
 - To learn more visit the Shopify Help Center or the Shopify Blog

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