Wrong VAT Values Being Calculated By Shopify Tax Since 2nd May 2025

[everydayscience]

Two of my clients are using Shopify Tax to handle import tax and duties and since the 2nd of May the calculated VAT values have been wrong.

Here is an example from today:

• Subtotal = 42.95 EUR
• Shipping = 15.95 EUR
• Total = 58.90 EUR

• Taxes [email removed] NL btw 21% (Included) = 9.74 EUR

See attached screen-grab:

Taxes are included in prices, which can be seen from the “taxes_included = TRUE” variable in the order’s full JSON data and also because the tax description on the order’s admin page also says “included”.

This means that the net value of the order is:

• total - taxes = net

Which is this with the real values:

• 58.90 - 9.74 = 49.16

The VAT rate on this order is 21%, so therefore the VAT value should be 21% of the net, but it’s not:

• 9.74 VAT = 19.81% of 49.16 net

I should confirm that:

1. There are no tax overrides in place.
2. This is not pro-rated shipping VAT because the order contains multiple items with different VAT rates.
3. The tax values were calculated correctly before the 2nd of May and no settings have been changed since.

The full order data or a sales report split to “line type” shows the separate VAT values calculated for “products”, “taxes” and “duties”, which for this order are:

• products total = 42.95 EUR
• products VAT = 7.45 EUR
• products net = 42.95 - 7.45 = 35.50 EUR
• products VAT rate = 20.99 %

Which is correct, enough to 21%

• duties total = 0.00 EUR
• duties VAT = 0.00 EUR

Which is correct.

• shipping total = 15.95 EUR
• shipping VAT = 2.29 EUR
• shipping net = 15.95 - 2.29 = 13.66 EUR
• shipping VAT rate = 16.76%

Which is a VERY long way off 21% !

This shows that it’s the VAT value for the shipping that is wrong.

This example order is from a client who ships from the UK and charges VAT on all UK and EU orders. it is all the EU IOSS VAT orders that are affected. Any orders valued over 150 EUR are handled by Shopify Tax’s DDP feature, and these always have correct VAT values. All the UK orders also always have correct VAT values.

My other client ships from Germany and charges VAT on all EU and UK orders. For themm, it is all the UK order valued under 135 GBP that are affected. Orders over 135 GBP are handled by Shopify’s DDP feature and these always have correct values. All the EU orders also always have correct VAT.

It therefore seems that this problem is limited to orders subject to cross-border VAT, but which are below the destination region’s threshold for simplified import VAT. Any orders over the threshold, and therefore being handled by Shopify Tax’s DDP, are not affected.

The problem first started for both clients on the 2nd of May, UK time. However, initially it was the product VAT values that were wrong on these below-threshold cross-border VAT orders. The VAT value was being calculated as though VAT was NOT included in prices, even though it was. The product VAT problem stopped on the 29th of May but was replaced by the shipping VAT values now being wrong.

I should confirm that:

1. There are no tax exemptions in place.
2. This is not a pro-rated VAT rate for shipping because this example order only has a single item in it and also, if multiple VAT rates were being applied to the shipping, they would be itemised.
3. All VAT was calculated correctly before the 2nd of May.
4. All other orders continue to have all their VAT calculated correctly, it is just these below-threshold, cross-border VAT orders that are affected.

The values for the shipping VAT seem to use a very strange % rate, but they all seem to use this formula:

• VAT = (price × VAT rate) / (1 + VAT rate) / (1 + VAT rate)

Which, in the case of the 15.95 EUR shipping for our example order where the VAT rate is 21%, the real numbers look like this:

• (15.95 × 0.21) / (1.21) / (1.21) = 2.31 EUR

This is 0.02 EUR different, but I think this is because the EUR values are converted values. The base currency for the store is GBP, and these are the GBP values in the order’s full JSON data:

• shipping total = 13.80 GBP
• shipping VAT = 1.98 GBP

And:

(13.80 × 0.21) / (1.21) / (1.21) = 1.98 GBP

I had a 3 hour live chat with Shopify support where they eventually agreed that the there was a problem with the VAT values and escalated the issue. A week and a half later I got a reply that explained how the correct VAT rate was being used to dynamically convert the GBP prices to the local currency for EU orders, so therefore the VAT was correct. Case closed. But the reply did not mention anything at all about the actual VAT values.

At the moment this problem means:

1. The order confirmations and customer invoices are wrong because the VAT values do not match the stated rate.
2. The EU IOSS VAT filings are wrong, because our agent is relying on Shopify data.
3. The customs declarations are wrong, because our shipping software is relying on Shopify data.
4. The accounts team are having to add adjustments to the bookkeeping to correct the Shopify data.

I am at a loss as to what to do now because there is obviously a problem and so far Shopify Support cannot either:

1. Acknowledge that they understand the problem I am trying to report, or
2. Tell me the tax settings are wrong on both stores run by separate clients with different tax set-ups.

In theory this problem should be affecting other stores so hopefully this post prompts some more reports of the same problem and a meaningful reply from Shopify.

[everydayscience]

Replying to my own post with an update.

Shopify Support have confirmed that there was a bug with the VAT calculations that affected the product VAT on all orders below de minimis since the 2nd of May. This was fixed on the 29th of May, but Shopify confirmed my observations that this fix caused a bug in the shipping VAT for the same orders.

A fix for this bug was rolled out on the 15th of August.

I only look after stores that do UK→EU and EU→UK cross-border sales, so I have only seen it affect EU and UK orders, but it could be affecting other cross-border scenarios where Shopify Tax is collecting VAT on below de minimis orders.

At the very least, this bug should’ve affected ALL Shopify stores using Shopify Tax collect IOSS VAT on orders into the EU valued up to €150 and to collect UK VAT on orders into the UK valued up to £135.

I only spotted these bugs because I had suggested for the accounts team at one of my clients to switch to manually inputting sales info into their accounts software, instead of relying on an integration, so that we could investigate why they were having difficulties reconciling Shopify sales. For some reason they trusted the figures from the integrations, but not the figures in Shopify’s own reports. In the case of these orders, the figures from the integration was hiding the incorrect VAT rate. Only by looking for mistakes in the Shopify data did they find these bugs!

For any stores using an accounts software integration that re-calculates the net/VAT split and does so using the gross figure, you should have the correct net/VAT split in your accounts software, even though it won’t necessarily agree with Shopify. If your accounts integration re-calculates the net/VAT split but uses the net value from Shopify, then you’re going to have incorrect gross figures in your accounts for below de minimis orders between the 2nd of May and the 15th of August.

Shopify are now investigating another apparent bug with collecting VAT and duties on cross-border orders. This time it is how the Shopify checkout decides if an order is above or below de minimis.

With these settings:

• Collect VAT on below de minimis orders (€150 in the EU and £135 in the UK) = TRUE
• Collect import VAT and duties on orders above de minimis = FALSE

The checkout correctly uses the net (ie ex VAT) value of the order to decide if the order is above or below the relevant de minimis threshold.

With these settings:

• Collect VAT on below de minimis orders (€150 in the EU and £135 in the UK) = TRUE
• Collect import VAT and duties on orders above de minimis = TRUE

Shopify checkout now uses the gross (ie inc VAT) value of the order to decide if it is above or below de minimis. The result is that the checkout charges duties on orders that are too low valued to require duties being charged. For one of my clients it then means that their shipping software disagrees with Shopify about which EU orders should be shipped IOSS and which should be shipped DDP. And it also means that the IOSS VAT return figures also disagree.

Oh the joy!

Should hopefully be fixed soon.