Regional Support: Taxes (Nordics)

[Victor]

Learn more about collecting and managing taxes while running your Shopify store in the Nordics.

This thread is part of the Regional Support threads offered for merchants in Scandinavia and the Nordic countries. To see which other topics are available, you can visit the Nordics hub here.

VAT overview in the EU

In the European Union, Value Added Tax (VAT) is a consumption tax that is applicable to most goods and services sold within its member states. The EU has standard rules on VAT, but individual countries within the trading bloc are able to set their own rates of VAT. Merchants operating within the EU must determine whether they are required to register for and pay VAT to their local tax authorities, and to the tax authorities of foreign member states if they are selling across borders.

Individual countries within the EU set their own rules regarding when businesses are required to register for VAT. For example, in Sweden local businesses are typically not required to register for VAT if their turnover for the fiscal year does not exceed SEK 30,000. A similar form of tax relief for small businesses also exists in Denmark, where registration for VAT may not be required if the revenue threshold of DKK 50,000 is not met within a 12-month period. Please note that Shopify cannot inform merchants whether they are required to register for VAT in their country, and it is the responsibility of the merchant to determine their own tax obligations.

EU taxes and Shopify

Shopify allows merchants in the EU to charge VAT to their customers by providing a VAT number in the taxes section of the Shopify admin, which can be accessed by heading to Settings > Taxes:

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Once merchants have entered their VAT number, Shopify will then automatically charge customers VAT on their orders when they make a purchase on the store. More than one VAT number can be provided if the merchant is charging VAT in multiple countries.

Shopify also allows the option to set tax overrides and exemptions, which provides merchants with more flexibility and control over their tax rates when necessary. Overrides can be useful for certain cases, such as when a different rate of VAT needs to be charged on specific products. These can be set on a regional level, meaning that an override may apply to one area a merchant sells to but not another.

Merchants in the EU will typically want to display their product prices with sales taxes included, meaning that VAT will already be included in the listed prices and will not be added at checkout. However, if the merchant decides to sell internationally to regions where you do not have to charge or remit sales taxes, you can enable an option in Settings > Taxes to calculate and exclude the tax cost for customers in these regions:

As an example, we can take a look at a scenario where a merchant based in Sweden sells domestically but also to the USA, a country where they are not required to charge and pay sales taxes at this time. They list their product prices with taxes included so their local customers can see the tax-inclusive prices on the store:

Here the apples are listed at a price of SEK 20, which includes VAT. However, when a customer in the USA adds the product to their cart and proceeds to checkout, they are shown the tax-exclusive price of the product when a US address has been entered:

The customer in the US is now only required to pay SEK 16, rather than the tax-inclusive price of SEK 20. This feature is helpful in ensuring customers in countries where tax does not need to be charged do not overpay for the goods and services sold by merchants in the EU.

Iceland and Norway

Unlike other Nordic nations, Iceland and Norway are not members of the European Union. They do, however, form part of the European Economic Area (EEA) along with the EU’s 27 member states and Liechtenstein. Tax laws in Iceland and Norway may vary and differ as a result.

Merchants in Norway are able to provide a VAT number in their Shopify tax settings and have VAT calculated automatically when customers make purchases on their store, in a similar way that merchants in EU countries can.

This is not the case in Iceland, however, where tax rates must be set manually within Shopify’s tax settings:

Useful links

Shopify links:

• EU taxes
• Registration-based taxes in the EU
• Setting up EU taxes
• Manage your EU taxes
• EU tax reference
• New EU 2021 VAT Rules for Ecommerce

Third-party links:

• What is VAT?
• Cross-border VAT
• 2021 VAT Rates in Europe
• All you need to know about the one-stop shop (OSS)
• EU 2021 One Stop Shop (OSS) VAT return for ecommerce

If you have a question or comment to make about managing your taxes with Shopify in the Nordics, please post it below.

[TeemuEAS]

That is a very thorough explanation of the Nordic taxes, thank you!

I would like to highlight that excluding Norway and Iceland, selling cross-border in the throughout the EU not just the Nordics is significantly simplified with the current regulation. Taking advantage of the new OSS regulation allows you to report and file your non-domestic B2C sales in the country of your incorporation.

To take advantage of the simplified sales to EU you need to register for OSS in your home country. The process is extremely simple, max 10 minutes in the tax office online portal (my opinion is that it should be mandatory). 

Customers like to receive the goods they have paid for, so you will need a logistics solution. There are exceptional blogs in the community on the subject, but to make it simple: keep it simple. Make a contract with your postal operator, they cover the whole EU. Then, as your requirements are better defined, make the more elaborate logistics solution. You will need to adjust shipping and shipping rates in Shopify, before that your store does not allow cross-border sales. That also allows you to block sales to countries. 

Next, you will need to have what is called a full landed cost calculator. Shopify has one, but if you want to take advantage of the 600 000 reduced VAT rates you will need a more robust one. Reduced rates mean you can increase your margins if you are having uniform pricing. Items such as books and foodstuff are usually with reduced rates, but there are the national curiosities such as sunglasses in Spain (well, understandable). EAS Compliance Solution will enhance your data with customs HS codes if required so you don't have to (talk to us for different practical solutions on this)

We believe in automation so get a solution which automates your report and data generation to make your internationalisation stress-free.

EAS Compliance Solution also handles all VAT schemes, supports multiwarehousing when you need it, multichannels... It really is an all in one solution: https://apps.shopify.com/eas-eu-compliance 

Book a meeting to get you selling across the whole EU in no time: 

https://meetings.hubspot.com/robert662/30-min-demo