Manage your EU taxes

Note

This guide is for stores that sell in the European Union. It's your responsibility to consult with local tax authorities or a tax professional to verify that you charge your customers the correct tax rates, and to ensure that you file and remit your taxes correctly.

After you update your store to use the new EU tax features, you can manage your tax settings, including your registrations, overrides, and customer exemptions.

Manage the regions in which you're registered

You can add, delete, or change your registrations or account numbers at any time.

If you have a micro-business exemption, and later require VAT registrations in other countries, then you're no longer qualified to be exempted. Additional VAT registrations aren't supported with the micro-business exemption. If you need to add additional registrations, then you must first change your registration type to One-Stop Shop registration or Country-specific registration.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. In the Regional settings section, click European Union.

3. In the Shipping from within the EU to the EU section, do any of the following:

   • To edit an existing VAT registration in another EU country, in the Collect VAT in an EU country section, click ... next to the region you want to edit.
   • To set up a new VAT registration in another EU country, click Collect in another location.
   • To edit an existing cross-border VAT registration, in the Collect VAT cross-border section, click ....
   • To set up a new cross-border VAT registration, in the Collect VAT cross-border section, click Collect VAT.

4. Update your regions and VAT numbers.

5. Click Save.

Override taxes

Sometimes the default tax rates don't apply to certain products. For example, certain types of children's clothing might be exempt from tax or have a lower tax rate. If the default rates don't apply, then you need to create an override. If you use Shopify Tax, then you use product categories to eliminate the need for most overrides.

Create a product tax override

Creating an override for products is a two-step process. First, you create a collection that includes the products that have a different tax rate. Then you specify to which region the override applies, and the tax rate to use.

Note

To create a tax override for an EU member country that you ship to, you need at least one registration in the EU.

Steps:

1. Create a collection by doing the following:
   1. From your Shopify admin, go to Products > Collections.
   2. Click Create collection, and then enter a name for it.
   3. Under Collection type, select Manual.
   4. Click Save collection.
2. Create the override by doing the following:
   1. From your Shopify admin, go to Settings > Taxes and duties.
   2. In the Countries/regions section, click the region to create an override for.
   3. In the Product overrides section, click Override.
   4. Select the collection.
   5. Select the region where the override applies.
   6. Enter the tax rate for the collection in that region.
   7. Click Add override.

Create a shipping tax override

Taxes on shipping charges can also be overridden. Shipping tax overrides take effect regardless of whether you have a tax policy in place on your Taxes and duties page.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. In the Regional settings section, click European Union.

3. In the Shipping overrides section, click Override.

4. Select the region where you want to apply the override.

5. Enter the tax rate for shipping in that region.

6. Click Save.

Manage your tax calculations

You can manage various settings that determine how tax is calculated on your products. For example, you can set whether taxes are included in your prices, whether to charge VAT on digital goods, and whether to apply tax to shipping costs. You manage these settings on the Taxes and duties settings page. Refer to Tax overrides and exemptions to learn more.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. In the Tax calculations section, select the options that apply.

3. Click Save.

Tax rounding

Previously, taxes were rounded at the invoice level by calculating the taxes on the order's subtotal, and then rounding the results. After you update your settings to use EU tax features, tax amounts are rounded at the line-item level. In this case, the total tax value is calculated by applying the tax rate to each line in the order, rounding the result, and then adding these subtotals together to arrive at the total value of the order.

Rounding taxes at the line level improves the calculation of different tax rates and makes it easier to calculate taxes for orders that include taxable and non-taxable products.

Example of tax rounding at the invoice level and at the line-item level

A customer places an order for 42 different items, each with a price of €14.99 EUR and subject to 20% tax. The line item tax for each product is determined by multiplying the price (€14.99 EUR) by the tax rate (0.20), for a result of €2.998 EUR.

Previously, the tax of each line item was added together, and the total was rounded. In this case, the added total was €125.916 EUR, which was rounded to €125.92 EUR.

Tax is now rounded at the line-item level, which means the tax amount is rounded for every product individually. The line-item tax amount of €2.998 EUR is rounded to €3.00 EUR, which is then added together to get the total. In this case, the tax total is €126.00 EUR.

EU reverse charge exemption

The EU reverse charge exemption fully exempts VAT on any order that's shipped to a B2B customer within the EU to any country that isn't the country that you're fulfilling the order from. For example, the exemption applies to an order that's shipped to a B2B customer in Ireland from a fulfillment location in France. This is based on your fulfillment location, and not the store address from your General settings.

An active EU location is required for the EU reverse charge exemption to work properly. If you have multiple fulfillment locations, then you can change an order's fulfillment location to another location outside of the customer's shipping country to allow the exemption to work as intended.