Financing, tax rates, and accounting
Hi everyone! Thanks for being such an awesome community.
We recently shipped an update to Shopify for merchants selling within the EU. You may have seen it - if not, you can check it out under Settings > Taxes in your admin, and look for "European Union" on the list of regions for taxes. From here, you can add your VAT registrations and Shopify will handle calculating taxes for you within the EU.
We've had a good amount of support interactions that are asking "Why is tax being charged everywhere within the EU when before I had it configured to charge taxes in only my home country?
I figured this would be a good place to address the change.
The European Union is made up of 27 different countries. Each of these countries charges VAT (Value Added Tax) on sales made within the EU. That means all regular sales must have VAT applied.
Knowing which VAT to charge
If you’re a merchant selling within the EU, it’s likely you’ll need to make sure to include VAT in your sales prices. This rate of VAT changes depending on the type of goods you’re selling, and where you are selling them within the EU.
Selling to customers within your home country
Selling to customers in your home country is pretty straight forward. You apply your local VAT rate on all sales in your home country.
Selling to customers in other countries within the EU
If you are selling to customers within other EU countries, the VAT rate you apply will depend on how much you’ve sold in that country.
For example, if you’re located in Austria and you’re selling to customers in Germany and haven’t reached the ‘Distance selling threshold’ for Germany, you need to apply the Austrian VAT rate.
Once you have reached the distance selling threshold for Germany, you need to start applying the German VAT rate to all your sales within Germany. You will also need to report these sales to Germany.
In short, we're doing this automatically for you as long as you let us know where you're registered. You may not have been doing this before, so this change may seem a little bit foreign to you. Previously in Shopify, we provided a settings page that would let you individually configure the rates you had to charge. This fell apart when rates changed, or your liability changes. Now it's simple for you to update your registrations and we automatically apply the correct tax.
Resource - European Union Tax
For B2B merchants - this might be a little bit different. You may not need to apply VAT to sales to other VAT-registered businesses. You can accomplish this by using our customer exemptions feature.
Donohue | Product Manager @ Shopify
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On my opinion this is a critical change in your settings.
In my specific b2B shop, we have daily moderate volumes of new customers and new orders but there are good chances to reach really high volumes soon. But now, this change you have made are influencing our business.
The solution you suggested for B2B is not the right one, please remind that most customers are registering while making their first orders, and anyway we do not have a dedicate person who checks which are the new customers and from where they are ordering.
Please make a fix where we can mass flag which country we do not want to collect VAT, or many of your b2b customers might opt for alternative solutions to shopify
Just to clarify.
EU regulations explain that if you sell goods to a business and these goods are sent to another EU country, you do not charge VAT if the customer has a valid EU VAT number. There are some exceptions but in most of the case is like mentioned.
Donohue | Product Manager @ Shopify
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Hi Donohue,
Just having a chat with a Guru as we're having new problems with shipping tax since this change and don't have an explanation for our client yet. In essence:
Even though we've got the 'Charge tax on shipping rates' box ticked.
Is this a oversight? Or some side effect of the recent changes?
Donohue | Product Manager @ Shopify
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Hi Donohue,
Thanks for the prompt reply. In the case that an order’s line items are all set to ‘not apply tax’, but the shipping should still be taxed, how do we go about setting this up?
We’ve got a situation with a client where, since this update, some orders have shipping taxed, and others not, which is unacceptable. It’s needs to be uniform.
What can we do in the case when we are working with AN Post, an Irish company that does not charge VAT? Why should we charge the clients VAT if for shipping we don't pay it?
Hey there, if you're using An Post, you can use a shipping override to accomplish a zero-rated shipping transaction. We don't have insight into whether or not you're just passing on the cost of zero-rated postage or not.
Donohue | Product Manager @ Shopify
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Hi Donohue,
Do you have any information on when this bug will be resolved? We have the same issue.
Best
Fred
Can you please make a simple check box in the tax section which, being having it checked, permits to collect VAT only for customers which are located in the same country of the shop?
I think this influences the customer behaviours, the customers say more expensive prices, which causes less sales for the shops and by consequence less transaction fees for you.
Hi @carlomat, thank you for your feedback.
If you're selling primarily to B2C customers (non-VAT registered persons), you should be applying your local VAT to all sales in the EU until you reach the distance threshold for the destination country. After this time, you register with the destination country and then apply that country's VAT rate on your sales within the destination country. Please see the resource I posted in the original post.
If you're selling primarily to B2B customers, I can see how our setup may be confusion. You could use our customer exemption functionality if you want to exempt specific VAT-registered persons from VAT.
If you have documentation to the contrary, feel free to post it - but we made this change so that merchants would be correctly sourcing and applying B2C VAT on their sales. If we gain enough feedback from the B2B selling community we will investigate further changes.
Donohue | Product Manager @ Shopify
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Hi @MrPorter - are you selling primarily to B2B customers?
If you are selling to B2B customers, you could think about using our customer exemptions feature. It doesn't properly determine between home VAT country or not, so it blanket exempts everyone but in the coming months we are looking to get feedback around EU VAT B2B functionality - watch for the post.
Donohue | Product Manager @ Shopify
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Hello Donohue,
we are only selling B2B.
The solution suggested by you is not enough, we are currently excluding the customers manually as described by your solution but this requires additional daily work. In addition to that, it does not help when a new customer register an account and then try to finalise a purchase. We noticed a lot of abandonment of new customers because of this 20% more.
We tried also to change the % of VAT to set to 0 because we sell more abroad than in our country but is not possible to make this change.
Hi @FredBart , please be more specific about the bug that you see.
Donohue | Product Manager @ Shopify
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Hi Donohue, I am referring to this post below. You are writing that it is a bug on your side. When will this bug be fixed?
***
Hi @MrPorter do you mind DMing me? I'd love to collect this feedback and learn a bit more about your situation
@FredBart can you DM me? I want to understand a bit more about the bug, I have some questions.
Donohue | Product Manager @ Shopify
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Can anyone tell me if you managed to use the following feature?
I tried to create a collection with Collection Type = Automatic with condition price >0€ but this collection is not shown in the list.
I hope someone of the support shows up and finally reply to my emails
Hi @Donohue!
This is the best news for beginners I think..
I created my website before one month and I am still waiting for my VAT and Organization numbers.
It's my first time doing the tax stuff and I am not sure if I did it write..
I wrote my personal number in the configuration instead of my organizational number, and I did not add any rate for the tax, is that enough? Or it's need the organization number?
Best Regards,
OSS change for EU VAT
As for 01 of June the rules for VAT thresholds and VAT registrations in EU countries are being simplified.
There is no need to register in each and every EU country where you do business also the VAT thresholds are disappearing. This OSS ( one stop shop) set of rules will allow you to have one VAT registration ( country where you are based) and supply all other EU countries, You need to charge correct VAT percentage per country.
With your normal VAT return your provide an OSS return, the latter needs to specify revenue per country and charged VAT. You pay to your national VAT authority who transfers the fund on your behalf to respective countries. Easy Peasy.
Is Shopify able to apply different VAT percentages under the same VAT number ? Furthermore, will Shopify be able to generate a report specifying revenue and vat per EU country ?
This applies only B to C.
Example, my Dutch company, will trade across Europe under a Dutch VAT number applying German, Italian and Portuguese VAT on all transactions. I supply an OSS vat return to the Dutch tax authorities, pay the Dutch authorities, who pay on my behalf the German, Italian and Portuguese VAT authorities.
Looking forward hearing from you.
J
Hi @jacobPurplebone
We will indeed make this change in June.
If you'd like, you can DM me to speak a bit more about the reporting concerns - would love to understand your view of what you will need.
Donohue | Product Manager @ Shopify
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We have the same problem like users before. We have a B2B business and have to uncheck the "collect tax"-Checkbox for EVERY CUSTOMER manually. Customers register and order afterwards immediately (or mostly they don't because the price in the shopping cart is so high). So we don't have the time and possibility to uncheck. That means we have to correct it after order and payment (what creates more effort) because we have to pay the money back. And we also loose customers because they see the taxes in the shopping cart and cancel the shopping cart. Please tell us the time horizon when you fix that issue.
What do you mean by the customer exemption feature ? how does this work. do the customer get notified after placing the order that they have been tax exempted and they get a new invoice automatically ?
Please this is a big problem for B2B sellers using shopify in EU.
Since these changes was implemented, there is no longer a way to charge EU customers different VAT rates and at the same time have VAT removed for non EU customers.
Is this something Shopfiy intends to correct? This is costing ourselves and all other EU merchants selling outside the EU a lot of money (as does it Shopfiy in the end), as customers no longer get the correct price. We have already had a lot of customers asking us why they all of a sudden need to pay the same price as the EU price listed with VAT. We understand there is technically no VAT in the prices for non EU customers, but as they need to pay import taxes and duties they shouldn’t pay the EU prices. This was working just fine until July 1st, and even though we have emailed a lot back and forth, we still haven’t even received a reply to if this will actually be fixed. This is a HUGE issue and it seems Shopfiy didn’t think this through properly. Since July 1st, our non EU sales has gone from 30% of total sales to less than 10%.
So we are now 3 weeks in after this issue appeared, and no fix in sight from Shopify. Did anyone hear anything from Shopify regarding this, or did you find a workaround? We are just walking in circles, chatting with different support members and getting almost identical replies which are;
- Cannot confirm whether or not a fix is coming, nor when.
- Solve this issue with custom coding or apps, both not possible for us since we have a custom theme and cannot access checkout coding as we are not a plus merchant.
Another issue that arose yesterday is The Canary Islands. Although in the EU since it is spain, they are not part of EU VAT. So VAT should be 0% and the price should be shown without VAT.
Only option I have found is to make a draft order and set tax to 0% but this is manual work and if a customer has made a purchase I have to cancel that order, wait for the refund and then send them a draft invoice. This is not a good solution.
Shopify has to make it possible to do tax overrrides in the EU or add The Canary Islands as a separate "country".
Turnover taxes in the Canary Islands (europa.eu)
/p
Facing the same issue here for an Spanish customer.
It seems that there is no possible way to add a "region tax override" anymore. It was possible prior to August 2020, but not anymore for new stores, at least according to this doc. Here you can see a store created prior to this date with the region tax override available:
So now the new shops are being forced to charge a 21% tax to Canary Islands customers that should pay 0%. So far Shopify is not taking care of this issue, so they are literally forcing merchants to illegaly charge taxes to tax exempt customers 🤔
Hello, I want to sell my products to Italian customers via a Shopify store (my company is legally based in Poland and I ship from Poland). Given the required Polish (and European) tax regulations, I would need to charge Polish VAT to Italian business customers who have a VAT number but are not VIES registered. Therefore, I would need a solution that will allow identifying whether an Italian B2B client is VIES registered, and if is not registered, then apply Polish VAT rates (for each specific product). On the Shopify app store, there are only solutions that allow for that, deducting VAT rate on the cart page (Sufio, Exemptify, Tax Exempt Manager), but which are not able to fetch the correct VAT rate post-VAT validation. Practical example: a B2B Italian customer has a non-VIES registered VAT number; if the B2B customer tries to make a purchase, the default set-up logic will charge him with Italian VAT (which is wrong, since I should apply Polish VAT). On the other hand, I would also need to apply Italian VAT to Italian B2C customers (customers who do not add their VAT number). Do you know of any solution for that? Thanks!
Please refer to "Selling goods to businesses based in another EU country", where it specifically says that "If your customer doesn't have a valid EU VAT number, you should usually charge VAT on the sale at the rate applicable in your country.
Hi
Ok after much thinking and losing lots of business to EU customers as we are B2C, we are UK based, we have set up markets finally for EU and international as well as USA etc.
We upgraded the plan to Advanced so duty and taxes are auto worked out per market by shopify when we export from UK.
OK now to further increase our sales we have decided that items we cant ship into EU we will have sent by eu facory to a nethewrlands warehouse so we can list them in the EU MARKET section and sell frictionless from EU to EU...to do that we are applying for an NL EU VAT number as required.
Now...my questions are this, if someone in france buys from our EU LOCATION in shopify will it be sent without any duties as eu to eu OR will shopify still charge the duty and or VAT as my SHOPIFY is UK Based???
If they order items i stock in uk that are ok to export i understand it will charge duty and or vat from my other UK LOCATION on shopify?
How do i set that up so eu location doesnt charge them will it auto do that, i think not, so although they maybe in eu and we send from eu they will wrongly be charged duty?
Hi,
well to be honest for B2B sales the tax settings are really confusing und do not lead to a good solution.
Right now, we are supposed to use the customer exemptions feature, however when I do that I may have another problem. We are based in Germany, so when we sell to German companies with a valid VAT-ID, VAT is charged and also displayed in the checkout correctly (You have to pay 1€ with 0,16€ included)
If I now switch to an Austrian company with a valid VAT ID, where I manually set up the customer as VAT exempt the price in the checkout is displayed without VAT. SO far so good. However, the price the customer has to pay does not change! (You have to pay 1€, no VAT is applied) This is not correct, as the customer would have to pay 1€ minus VAT.
So even the customer exemption feature is not the solution for B2B sales in the EU. What I would need is a dynamic pricing feature like the one that's already in place (https://help.shopify.com/en/manual/markets/pricing/dynamic-tax-inclusive-pricing) However instead of just looking where the customer is based, this would also have to look if the customer is B2B and then also deduct taxes in the checkout.
When can we expect a solution for a basic problem that even free shop system have supported for years?
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