Setting up EU taxes

If you're new to Shopify, then before you start selling, you need to determine whether you should charge tax. You might need to register with various VAT member countries. After that, you can set up your taxes in Shopify to help ensure that you charge the correct rates wherever you sell in the European Union.

Before you begin setting up EU taxes in Shopify

You need to determine whether you should charge taxes. If you're not sure, then consult with local tax authorities or a tax professional. Typically, if you intend to sell to other countries in the EU, then you need to register with the tax authorities in your own country to charge VAT.

If you exceed a certain threshold of sales into another country in the EU, or you have a significant business presence there, then you might need to register for the One-Stop Shop (OSS) scheme, or contact each of the relevant agencies and register with them. The process varies depending on where your business is based and where you sell, and on individual government requirements. Where you're registered to collect VAT determines the rates that you charge to your customers.

  • 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 of 10,000 EUR.
    • If you do not exceed the threshold, then your local VAT rate is charged.
    • If you exceed the threshold, then the VAT rate of your customer's country is charged. To charge the destination country's VAT rate, you need to register for a VAT number with OSS or with that country.

If you have a significant presence in a country, then you should contact that country's tax authority to confirm whether you need to register to collect taxes. It's your responsibility to determine if your business exceeds the distance sales threshold.

Charge VAT with the OSS

The One-Stop Shop scheme, also called the Union OSS, is for merchants with locations in the EU whose sales to other EU member countries require them to charge and remit VAT based on destination countries. Because of Northern Ireland's dual status, merchants with locations in NI can also use the OSS.

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.

You can only use OSS if your store uses registration-based taxes. If you haven't updated your settings to use registration-based taxes, then update your tax rates manually by using location-based tax rates.

Set up your VAT registrations

After you've registered with the VAT member countries and have your EU VAT number, you can set up your taxes. You only need to perform this task once.

Steps:

  1. From the Shopify admin, go to Settings > Taxes.
  2. In the Tax regions section, beside European Union, click Set up.
  3. On the VAT on sales within the EU page, click Collect VAT.
  4. Select how you're registered for VAT.
    • If you've registered for the OSS scheme and you plan to submit a single VAT return for all sales to customers in EU member countries, then select One-Stop Shop registration.
    • If your store makes yearly sales of 10,000 EUR or less and you plan to submit a VAT return to your local tax authority, then select Micro-business exemption. The micro-business exemption is not available if you have more than one VAT registration.
    • If you plan to submit a VAT return directly to the tax authorities of EU member countries that you ship to, then select Country-specific registration.
  5. Click Next.
  6. Do one of the following:
    • If you selected One-Stop Shop registration, then enter your VAT number from the country where you're registered, and click Collect VAT. If you need to add additional VAT registrations, then click Add country on the VAT on sales within the EU page.
    • If you selected Micro-business exemption, then enter your VAT number from your home country, and click Collect VAT.
    • If you selected Country-specific registration, then enter your VAT number from the country where you're registered, and click Collect VAT. If you need to add additional VAT registrations, then click Add country on the VAT on sales within the EU page.

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