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