Inquiry Regarding VAT Charges for EU and UK Customers

Accounting & Taxes
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Topic summary

A Shopify merchant seeks to configure VAT settings so that UK customers pay VAT while EU customers are exempt. By default, Shopify charges VAT based on shipping address, meaning EU customers would normally be charged when shipping within the EU.

Proposed Solutions:

  • For UK customers: Enable VAT (20%) through Settings > Taxes and Duties > United Kingdom
  • For EU B2B customers: Use Shopify’s built-in VAT ID validation (Shopify Plus) or third-party apps like Exemptify or Simply VAT
  • For all EU customers: One responder suggests simply not setting any EU tax rules and switching to basic tax for the EU market, which would exempt all EU sales from VAT
  • Advanced options: Shopify Plus users can utilize Shopify Scripts for custom tax logic; alternatively, apps like TaxJar or Avalara offer flexible tax customization

Current Status:

The original poster received detailed step-by-step implementation guidance and a simpler alternative approach. They acknowledged both responses, and the discussion appears resolved with actionable next steps provided.

Summarized with AI on October 30. AI used: claude-sonnet-4-5-20250929.
2

Hey Fancypeople,

Yes, Shopify does allow you to configure VAT rules based on customer location, but the setup you’re looking for—charging VAT for UK customers while exempting EU customers—requires a combination of Shopify’s built-in tax settings and potential third-party solutions.

  1. Configuring Shopify Tax Settings

By default, Shopify determines VAT based on the shipping address, meaning that EU customers should still be charged VAT when purchasing from an EU country. However, you can set up tax overrides to achieve a partial workaround:

For UK Customers:
Navigate to Settings > Taxes and Duties in Shopify.
Ensure that VAT is enabled for the UK under Tax regions.
Shopify will automatically apply the correct VAT rate for UK orders.

For EU Customers (VAT Exemption for B2B Sales):
If you are selling to EU businesses with a valid VAT ID, you can enable VAT exemptions using Shopify’s EU VAT exemption feature (Shopify Plus required) or a third-party app like “Exemptify” or “Simply VAT”.
If you want to exempt all EU customers from VAT (even B2C), Shopify doesn’t support this natively, but you can adjust pricing accordingly or use a tax app.

  1. Possible Workarounds
    Since Shopify doesn’t provide a direct option to charge VAT only for UK customers while fully exempting EU ones, consider these solutions:

Third-Party Tax Apps:
Apps like TaxJar, Avalara, or Exemptify allow for more flexible tax rule customization.
They can apply VAT only for UK customers while recognizing EU addresses and exempting them.

Custom Shopify Scripts (Shopify Plus Only):
If you’re on Shopify Plus, you can use Shopify Scripts to create tax logic that charges VAT for UK customers while exempting EU ones.

Manual VAT Pricing Adjustment:
Some merchants adjust product prices to account for VAT differences and display different pricing based on customer location using GeoIP-based pricing apps.

  1. Recommendations
    If you’re on Shopify Plus, the best approach is to use Shopify Scripts to customize tax rules.
    If you’re on a lower plan, consider integrating a third-party tax app like Exemptify or TaxJar.
    If you primarily sell B2B in the EU, enable VAT exemptions for EU business customers in Shopify’s tax settings.

Let me know if you need further clarification or a step-by-step implementation guide!