Understanding zero-rated VAT for UK products: Do I uncheck 'Charge tax'?

[jgd1955]

Am I right in thinking that for zero rated VAT products here in the UK (books/maps) I need to uncheck the 'Charge tax on this product' for each product or should I use tax overrides?

We also sell internationally.

[AnneAlice · Accepted solution]

Hello,

Yes, you're correct. For zero-rated VAT products in the UK like books and maps, it's advisable to uncheck the 'Charge tax on this product' option for each individual item. This ensures that no VAT is applied to these products within the UK. However, when it comes to international sales, it's crucial to consider the tax regulations of the destination country. Depending on those laws, you may need to apply VAT or other taxes on products sold internationally. In Shopify, you can utilize tax overrides to establish specific tax rules for different regions or countries. By doing so, you can ensure compliance with the tax requirements of each destination, thus avoiding any potential issues related to tax collection and reporting.

[jgd1955]

To add to this we're setting up a shop and migrating from Magento.

We sell books and maps and we don't have to charge tax on any of these products but when we sell in to the EU we do. For instance Ireland charges 5% VAT.

How do we set up the rpducts to handle this scenario?

Thanks in advance

Jon

[AnneAlice · Accepted solution]

Hello,

Yes, you're correct. For zero-rated VAT products in the UK like books and maps, it's advisable to uncheck the 'Charge tax on this product' option for each individual item. This ensures that no VAT is applied to these products within the UK. However, when it comes to international sales, it's crucial to consider the tax regulations of the destination country. Depending on those laws, you may need to apply VAT or other taxes on products sold internationally. In Shopify, you can utilize tax overrides to establish specific tax rules for different regions or countries. By doing so, you can ensure compliance with the tax requirements of each destination, thus avoiding any potential issues related to tax collection and reporting.

[jgd1955]

Thanks! It's a bit messy, but thought that was how we would have to appraoch it. We're also looking at an IOSS app that may have a bearing on how we set tax up for EU countries.

[AnneAlice]

Yes I know tax calculation is always a mess without a tax calculator. For VAT calculations I use this VAT Calculator it has VAT rates all across world.

Your question was related to VAT tax UK so this website also covers the aspects of VAT In UK.

[Rostislav · Accepted solution]

HI Jgd1955,

The solution which is marked as accepted here will not work if you supply to EU. In all EU countries (apart from Denmark)  books are subject to reduced VAT rate (Denmark -standard rate) and they should be taxable in Shopify to enable taxation. We have a few hundred UK booksellers and there are solutions for this situation. 

It is done like that :

1. Inflate the price in the catalog for 20 percent

2. Fix price for the UK market for 0 rated products 

3. Apply negative markups for EU Market to counterbalance standard EU VAT rates 

4. Install overrides for the EU zone. 

This solution will not work if you have audio/e-books as variations of printed books. We have a different workaround for these situations.  

We set up book stores every day for our clients. We provide IOSS services for UK based customers and it is a usual situation when we see stores with books marked as non taxable . It all works OK until you start selling to EU where taxation should apply. 

Do visit us at www.easproject.com we can provide set-up service to you and an easy IOSS service. 

[jgd1955]

I did wonder about selling in to EU. We're migrating from Magento 2 where we couldn't find a decent IOSS solution so currently we don't automatically charge VAT on products sold in to the EU. We sell a considerable number.

We have identified easproject as a suitable IOSS solution for Shopify and will be in touch when we're ready to launch.

To clarify couldn't we leave the prices as they are in the catalog (they are VAT inclusive) and apply a negative markup for the UK market? Shopify would then work out the correct VAT rate for EU markets? Why don't I apply the override to UK market?

99% of the products are zero rated in UK.

Thanks

Jon

[Rostislav]

Hi Jon, 

If you make products taxable,  the negative markup will reduce the price , but the shopify tax engine will still charge VAT inclusively and there will be VAT charged at the checkout. Another side of the story - you want to see the same price for UK products on storefront in the cart and in the checkout.    What you propose will not give you the expected result (on storefront the price will still be 20 percent higher than in the checkout). So fixing price for the market is the thing. It is not complicated and is done via csv.  We have played a lot with these settings and fixed price is the best solution. When you complete migration  - do register with us and we can find the best pricing arrangement for your store. 

[jgd1955]

I'm not sure I understand.

This product https://6ba3f7.myshopify.com/products/the-4000m-peaks-of-the-alps-rock-climbing-guidebook?variant=46... is £24.99 on the storefront and if I add it to the cart it is still £24.25 if I'm shipping to the UK. The only thing that is incorrect is that it says that tax is included when it's a zero rated product in the UK

I've not set up to collect tax in the EU yet as I don't have an IOSS solution so not tax is ahown as included when I ahip to say France

[Agreeableagony]

Thank you for this recommendation.  It is kind of ridiculous that  Shopify cant get their act together to apply correct VAT based on HScode (info they already have...)

Etsy and other platforms all just handle this correctly. 

[Rostislav]

HS code system is a mess in itself - it is not precise (classification is really a problem in many cases)  and some countries (like Portugal) do not even provide official rules for applying reduced rates to specific HS codes...

[Agreeableagony]

Noted. Still, it seems like if platforms like etsy can accurately categorize an item as a book and then charge a reduced VAT rate accordingly, shopify (a usually more advanced platform) should be able to figure that out.

Its wild to me that they dont seem to consider it an issue with their system, even with all their push for managed markets etc.