Hi everyone, I can’t seem to find any clear/simple guidance on this - I believe that I’m not responsible for collecting VAT taxes for large orders to European countries. But for smaller orders, I read that I may be responsible for collecting VAT taxes and remitting. Has anyone encountered this? (our Shopify store sells sporting goods if that has any implications on my question). Thank you!
Hi @jasonthe ,
Thank you for reaching out about this, and I can empathise with your confusion! EU VAT can be confusing at the best of times and it is not always clear what your obligations are as a merchant when you are operating outside of the EU. I will do my best to offer some clarity on your situation below but please bear in mind that this is only general advice, that Shopify cannot determine your tax obligations for you, and that we also recommend speaking to a tax professional if you are unsure of when you need to collect and remit sales taxes.
Shopify offers a guide on EU taxes that covers the basics of EU VAT and EU tax registration, which is a good place to start. There is also an article on the Shopify Blog which explains the changes to EU VAT laws that came into place in July of this year which I would also recommend reading. This section in particular is likely of interest to you, as you run a non-EU business exporting to the EU:
What are the changes for businesses exporting goods to buyers in the EU?> > There are two major changes that will impact the VAT threshold and tax filing for non-EU businesses:> > All orders shipped to the EU are now subject to VAT. Until July 1st, 2021, when buyers in the EU purchase goods shipped from a country outside of that region with a total value below €22, they are exempt from paying VAT. As of July 1st, 2021, buyers will be required to pay VAT on all purchases up to €150. Import VAT and duties will continue to apply on orders above this threshold. Merchants shipping goods to EU buyers from outside of the EU can choose to collect VAT on orders below €150 to simplify the buying and shipping experience for their customers. If merchants choose not to collect VAT on exports to the EU below €150, customers will be charged upon delivery of the goods by the carrier.> > Import One-Stop Shop (IOSS) filing. Merchants who choose to collect VAT on orders below €150 should use the newly introduced Import OSS (IOSS) to file a single monthly VAT return for all low value exports to the EU. Non-EU merchants opting to use IOSS may need to appoint a VAT intermediary.
The above guide explains in more detail what VAT needs to be charged when goods are imported into the EU. I would also recommend reading the European Commission’s guide on the new Import One Stop Shop (IOSS) system, which is designed to make the collection and payment of VAT within the EU easier for merchants selling to EU member states. Shopify offers further context on this scheme here.
I hope my reply was helpful, but as mentioned, speaking to a tax professional is always advisable if you are unsure of your tax obligations. Please let me know if you have further questions.
Ok, so my understanding is that as a merchant we may CHOOSE to charge VAT but if we choose not to, then the customer will be charged VAT upon delivery. Which is how we are currently operating. Can you confirm?
Hi @jasonthe ,
That is my own understanding, yes. However, I would qualify that I am no tax expert and that speaking to a professional is recommended if you are unsure of when you’re required to charge and remit taxes in the EU. I would recommend looking into the individual tax laws for each EU member state you wish to sell to as they may have different requirements and thresholds when it comes to VAT-registration becoming mandatory for overseas sellers.