Refunds and VAT

[Jenny_Adamczak]

Hello,

we're facing the following problem: We're a beverages home delivery service and in Germany there is a bottle deposit. Therefore, customers are allowed to return their empty bottles and we're giving them a refund on their order. Bottle deposit is VAT-exempt. Unfortunately, there is no option to say that the refund we're processing via Shopify should not influence the VAT. As an example:
Anna buys 4x mineral water for 4€ each and therefore has to pay 16€. 2,55€ VAT is included. Anna gets her delivery and returns 1x empty glass bottles for 3,30€ from her last delivery. We process a refund on Shopify for 3,30€. The VAT sum of 2,55€ should NOT CHANGE, but it does, because Shopify doesn't know that the bottle deposit is VAT-exempt. So there is a new invoice amount of 16€ - 3,30€ and VAT goes down to 2,03€. This is a huge problem for us as we automatically get our invoices generated out of Shopify and we're obviously either paying less taxes than we're supposed to or have to change each invoice manually which is not possible.
Is there any way wo could fix this issue?

Many thanks for your help,

Jenny

[Nick]

Hi @Jenny_Adamczak,

Nick here from Shopify. 

This is a great question and I'm wondering if tax overrides and exemptions could work for you here. Even though Shopify automatically calculates most taxes you can override some tax charges for particular products and collections. You can also set unique tax rates for specific shipping destinations and customers. One of the most common exemptions is the VAT tax. 

I'm thinking that you could apply a VAT tax exemption for the bottle deposit product. Shopify has a help document going through everything you need to know about tax overrides and exemptions which you can see here. Would you be able to test this out and see if it does, in fact, work if it doesn't, could you please reply here with some more details and we can troubleshoot this further to see if we can make it work.

Hopefully, it works though. 

All the best, Nick

[Jenny_Adamczak]

Hi @Nick,

thank you for your quick response. Unfortunately, that doesn't work for us. It is not a specific product that we process a refund for, but a varying amount that we refund. We're typing in a custom amount in the section 'refund amount'. There, you do not have the chance to choose VAT-exemption.

Kind regards

Jenny

[ThomasBorowski]

Are you using this app? https://apps.shopify.com/product-fees

If that's the case, you can set the deposit to be tax-free and when you refund the deposit line item, it should be tax-free too.

[Jenny_Adamczak]

Hi,

no, I guess you're getting the problem wrong. Please see the screenshot to understand. Customers usually do not give the same amount of empty bottles back as they just purchased, in the example of the screenshot, it may be that the customer gives back 10x "Pfand 12x Glas" for 3,30€ each, so we need to refund a custom amount and won't be able to refund a specific product. Sometimes customers bought some of their beverages at a supermarket but are allowed to give it back to us. And when you enter a custom amount for the refund you can't choose if it should be VAT-exempt or not.

[ThomasBorowski]

OK, I think I get it now. @Nick 's solution would work if you only ever refunded the deposit of a particular order up to the amount of deposit products in that order. But if a customer sends back more bottles than he ever purchased from you, you can't refund them.

Which also begs the question: What do you do if a customer buys one case of water but sends back 10? You couldn't refund that through the respective order because the refund amount would exceed the order value.

In any case, refunding a custom amount doesn't seem to respect VAT-exemption or even different VAT rates. If you have a mixed 19% + 7% VAT order and refund a custom amount, Shopify just subtracts that amount from the order total without respecting the mixed VAT.

I really can't think of a good solution to this other than handling desposit refunds outside of Shopify. But that introduces the problem that you're paying transaction fees on the order total including deposits, so that's not ideal either.

[Nick]

Hi @Jenny_Adamczak,

Thanks for explaining this further and adding the screenshot, it really helped clarify your exact situation. 

After learning more about this situation, I think @ThomasBorowski is correct in saying:

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In any case, refunding a custom amount doesn't seem to respect VAT-exemption or even different VAT rates. If you have a mixed 19% + 7% VAT order and refund a custom amount, Shopify just subtracts that amount from the order total without respecting the mixed VAT.

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Other than a VAT or tax exemption, I'm not sure there's a way around removing VAT and because your situation is so unique it maybe doesn't quite apply for all of your refund scenarios. 

[fandli_tw]

Hi @Jenny_Adamczak 

I have the same problem. Did you find any good way to solve it?

[tinipixi]

Hi @Jenny_Adamczak,

We are encountering the same problem with Pfand. 

Please let me know if and how you resolved it? I am referring to the tax issue. 

How do you  process the return? Via a coupon?

Many thanks,

Christina

[mrniamster]

Hello Jenny_Adamczak,

After looking a lot , we too came across this, and finally you should try this:

https://apps.shopify.com/pfand-deposit-fee

as the name suggests,it will create pfand fees  for your store