Removing tax for international orders from UK

Shopify Staff
Shopify Staff
23 0 18

Hi everyone, my name is Cole and I work with the cross border team at Shopify.

As a past merchant myself who sold between New Zealand and Australia on the platform, I certainly empathize with all your sentiments and wanted to let you know that fixing how inclusive/exclusive tax pricing works when selling internationally is a major priority for us. This is a large internal change so we are unable to provide a specific timeline at the moment, but we will be sure to share updates in this thread when we can.

We are working hard on adding other global selling capabilities in addition to the above, and you will see more things around managing international pricing and import duties / taxes in 2021 as well. Again, we will share in this thread when available. We always appreciate your views and feedback and thank you for your patience.

Cole Atkinson | Product @ Shopify
Tourist
7 0 2

Cole,

This is the first time we have seen anyone from Shopify recognising that there is an issue that needs to be fixed, so that is a step forward.

However, the lack of a timeframe is frustrating. This is an issue which has been signalled for years and Shopify only now seems to be taking it seriously. We are a UK business with around 10% of our sales to consumers in EU countries. From 1 January we will not charge VAT to EU customers, but UK law will still require that our prices are shown inclusive of VAT which means that our EU customers will also pay the VAT-inclusive price. In addition, they will also have to pay their domestic VAT when the goods are imported into the EU, so will be overpaying. We will lose sales because of this, and Shopify will therefore also lose income.

This is actually a problem right now for sales to Jersey and Guernsey (which are not subject to VAT) as well as sales to other non-EU customers, but will become much more acute (and costly to us) from 1 January. Please fix this issue as soon as possible.

All Bamboo

Tourist
3 0 3

Hi Cole

Are we any further forward on reaching a resolve on this? As many of us UK businesses have mentioned on this thread we can’t charge EU countries VAT from 1/1/2021 yet cannot advertise our prices ex vat- this date is fast approaching. 

Do you have a solution for us? 

Siobhan 

New Member
1 0 1

Hi Cole

This should be a simple fix. If your prices include say 19% tax/Vat, the product price which excludes the Tax should be the Tax included price / 1.19... simple maths.. Please make this a priority as it is much needed... Do you have any timeline available?

 

Tourist
3 0 3

I just want to add my input to this to confirm that it indeed a MASSIVE shortcoming to the Shopify platform. FWIW I think the the platform is the best I've ever used but unfortunately I'm going to have to move away from it. I've dreaded this time coming, I always assumed the issue would be given priority as Brexit became a reality and the impact became much bigger but it's clear from the posts on here and my comms with the support team that there's no motivation to get this fixed.

 

I actually suspect that there's loads of merchants out there that don't even realise this is an issue but once the Brexit rules kick in it'll become a problem for them. By then, it'll be too late and I think lots of merchants will already have jumped shipped. 

 

I wonder if the importance of this issue just isn't being communicated to the correct people? 

 

What also rubs salt into the wounds is when I get an email from Shopify telling me 'Brexit’s deadline is fast approaching' and lists the things I should be doing to prepare. Thanks but I've already got my shit in order, it's you that has stuff to sort out, not me.

 

  

Shopify Staff
Shopify Staff
23 0 18

Hi everyone, today we have begun rolling out the first of our planned improvements to help you in this area when selling internationally by introducing a new tax setting:

Final copy.png

This is rolling out progressively over the next couple of days. Some of you may already notice it available in your store.

This release will adjust your prices at checkout based on where your store is based and where you are shipping to. For example if you are based in the UK with 20% VAT included in your prices, selling a £100 item:

  • Domestic sales will continue to be £100
  • A sale to Australia would be
    • £91.66, if you have a tax registration in Australia (£100 less 20% VAT + 10% Australian GST)
    • £83.33, if you don't have a tax registration in Australia (£100 less 20% VAT)

final.png

You can read about this change and how it works here.

Specifically in regards to the UK, it is still part of the EU. So if you are shipping to another EU country and do not have a VAT registration there, your local VAT rate is still applied. After Brexit on Jan 1, the UK and the EU will be separated out in Shopify to collect the right amount of VAT, according to your tax registrations, when selling from the UK to EU countries and vice versa.

In 2021, we will improve the storefront experience to align with checkout, so what a buyer sees on your storefront (depending on their country) will also be what they see at checkout, without the need for such adjustments.

Cole Atkinson | Product @ Shopify
Tourist
7 0 2

This is great news! We have tried it out for Jersey/Guernsey customers (already outside the EU VAT area) and it works.

Hopefully others will find the following information in relation to delivery prices useful. We use a postcode based shipping app which calculates delivery costs based on the delivery country/postcode and other factors such as weight and order value:

  • The shipping price entered in our app is the actual price charged to customers - VAT is not automatically deducted from that shipping price. So, if we set the app to specify a flat rate of £6.00 for deliveries to Jersey, and that is how much the customer is charged for delivery to Jersey.
  • The app can calculate shipping cost based on order value. For Jersey/Guernsey customers it does this based on the VAT-free order value, not the VAT-exclusive order value.

It will be good to align the storefront prices to the actual price customers will pay (presumably based on geolocation of the customer), but this is a great start. For now, we use the Geo Targeting ‑ Custom Pop‑Ups app to display a message to Jersey/Guernsey customers (and in future EU customers) to let them know that displayed prices include UK VAT which will be deducted at checkout.

Thank you Shopify for finally listening!

 

Tourist
3 0 3

Really, really pleased this has been fixed. Thank you.

I do have one issue though and hopefully it's just a setup/configuration issue.

It looks like the tax is removed from the item in the correct way but it doesn't look like the tax is being removed from the shipping cost.

for example, I'm in the UK and I sell an Item for £50 to the US. When I checkout I see the item listed at £41.67 (£50 less the 20% VAT) which is correct but the shipping cost which is £14 is listed still as £14, it should also have the tax removed.

 

There is a checkbox in the settings that allow me to disable tax on shipping rates but that disables them for all shipping rates including domestic ones which it shouldn't.

 

I've looked through the documentation including the recent stuff regarding this new fix but can't see anything that would fix this.    

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Tourist
7 0 2

Steven,

See my earlier post about shipping costs - I agree that VAT is not deducted from shipping costs.

I think the way to fix this is to have, in your example, two separate shipping zones with different prices: a UK zone with the shipping price of £14.00 and a US zone with a shipping price of £11.67.

AllBam

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Tourist
3 0 3

AllBam,

 

I should have been clearer, it's not really about the cost. I do have different shipping zones setup. The problem is in the reporting of the tax. Currently if it costs me £14 to send the item to the US and I don't make any margin on shipping costs, I'm just passing the cost on, my tax report will show that I have collected £2.33 in VAT which I will have to pay to HMRC meaning I will actually be losing money on shipping.

 

Steven

 

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