EU tax reference
Countries within the European Union and in the United Kingdom charge a value-added tax, or VAT. EU VAT is calculated according to destination-based sourcing, which means that tax is charged to a customer based on their location. The minimum value of this tax is 15%, but each member country sets their own rates.
A VAT number, also referred to as a value-added tax identification number (VATIN), is required to charge VAT. It's provided to you by a member country's tax authority after you register with them.
As of July 1, 2021, distance selling thresholds for individual countries no longer apply. Instead, a single distance selling threshold applies for the entire EU.
- For customers in your home country, your local VAT rate is charged.
- For customers in EU countries outside your own, the rate is determined by whether you exceed the registration threshold.
- If your combined sales to all other EU member countries are less than 10,000 EUR in total, then you can choose to charge your home country’s VAT rate in other EU countries and remit VAT to your home country’s government. If you choose to charge your home country's VAT rate for all EU sales, then you might need to apply for the micro-business exemption with your local tax authority. If you're not sure whether you need to apply, then consult with your local tax authority or a tax professional.
- If your combined sales to all other EU member countries are equal to or greater than 10,000 EUR in total, then you charge the VAT rate in your customer's location for all sales to other countries.
A new One-Stop Shop scheme (OSS) is available as of July 1, 2021. The OSS scheme allows merchants to collect and remit VAT for sales in all EU member countries, rather than registering for each member country individually.
Tax reference for EU member countries and the United Kingdom
|United Kingdom||HM Revenue and Customs|
One-Stop Shop schemes
Starting July 1st, 2021, One Stop Shop schemes are available that allow merchants to simplify charging and remitting VAT for sales to EU member countries.
- The One-Stop Shop (OSS) scheme, also called the Union OSS, is for merchants within the EU whose sales to other EU member countries require them to charge and remit VAT based on destination countries. After July 1, 2021, you can use the OSS scheme if your annual sales to all other EU member countries are equal or greater than 10,000 EUR.
- If your annual sales to all other EU member countries are less than 10,000 EUR, then you can either use the micro-business exemption to charge your local VAT rate, or register for the OSS if you want to charge VAT based on the location of your customers.
- The Import One-Stop Shop (IOSS) scheme, also called the Non-Union OSS, is for merchants outside the EU that sell to customers located in any EU member country. After July 1, 2021, you can use the IOSS scheme if you are located outside the EU and sell to customers located in an EU member country, and you don't want your customers to be charged tax upon delivery.
- Using IOSS, you can choose to collect VAT on orders equal to or less than 150 EUR at checkout so that your customers don't pay taxes upon delivery.
For example, you have a location in Sweden and a location in the United States. You use the OSS scheme for orders that are shipped from Sweden to customers in the EU, and the IOSS scheme for orders that are shipped from the United States to customers in the EU.
In your Shopify admin, you enter your OSS registration. Using OSS and IOSS at the same time isn't supported, so the option to collect VAT on orders shipped from outside the EU to customers within the EU using the IOSS is disabled.
Charge, report, and remit VAT with the OSS
- Register for the OSS with the tax authority in your own country.
- Update your tax registrations.
- Report sales and remit VAT to the OSS, instead of registering for a VAT number with individual EU member countries.
Registering for the OSS is optional. If you don't register for the OSS, then you continue to register for VAT in individual EU member countries.
Charge, report, and remit VAT with the IOSS
Currently, if you're located outside of the EU and you sell to customers within the EU, then you aren't required to collect VAT on orders under 22 EUR. After July 1, 2021, orders equal to or less than 150 EUR have VAT applied to them, and orders greater than 150 EUR have import VAT and duties applied.
You aren't required to collect VAT regardless of the order amounts. Using IOSS, you can choose to collect VAT on orders equal to or less than 150 EUR at checkout so that your customers don't pay taxes upon delivery.
- Register for the IOSS with the tax authority in an EU member country.
- Charge VAT based on the destination country.
- Report sales and remit VAT to the IOSS.
Registering for the IOSS is optional, but it is required if you intend to charge VAT during the checkout process. If you don't charge these taxes at checkout, then your customer pays them to the shipping carrier upon delivery.