Setting up taxes in Northern Ireland

Note

This guide is for merchants with locations in Northern Ireland. 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.

Under Brexit, Northern Ireland (NI) has adopted a dual status and is considered part of both the EU and the UK tax regimes.

If you use registration-based tax settings, then VAT is calculated based on the order's origin and its destination. UK VAT applies to orders from within the United Kingdom to customers in Northern Ireland, and to orders from within Northern Ireland to customers in the United Kingdom. EU VAT applies to orders from within the European Union to customers in Northern Ireland, and to orders from within Northern Ireland to customers in the European Union.

Before you begin setting up EU and UK 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 countries in the EU, then you need to register with the tax authorities in your own country to charge EU VAT. If your sales to customers in the UK are equal to or greater than 85,000 GBP within a 12-month period, then you typically need to register to charge UK VAT.

If you exceed a certain threshold of sales into a 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 to 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. To charge your local tax rate to customers in the EU, you need to use the micro-business exemption.
  • 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

Note

Tax laws for selling to EU member countries changed on July 1, 2021.

The One-Stop Shop scheme, also called the Union OSS, is for merchants with locations in the EU and NI whose sales to customers in other EU member countries require them to charge and remit VAT based on destination countries.

If your annual sales to all other EU member countries are less than 10,000 EUR, then you can do either of the following:

• Use the micro-business exemption to charge your local VAT rate.
• 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 registration for the UK

After you've registered with a tax authority and have your UK VAT number, you can set up your UK taxes. You only need to perform this task once.

Steps:

1. From the Shopify admin, go to Settings > Taxes and duties.
2. In the Countries/regions section, click United Kingdom.
3. In the VAT collection section, click Collect VAT.
4. In VAT number, enter your VAT number. If you have applied for a VAT number but don't yet have one, then leave this field blank. You can update it when you receive your number.
5. Click Collect VAT.

After you set up your tax regions, then you can create tax overrides for products where the default tax rates don't apply.

Tax overrides set for the UK affect orders in the following examples:

• Orders that are placed by a customer in the UK and that are shipped from the UK, including Northern Ireland
• Orders that are placed to or from Northern Ireland if the Micro-business exemption is selected for Northern Ireland, which results in the merchant's local VAT rate being charged
• Orders that are placed from a customer in Northern Ireland to a merchant in an EU member country if Country-specific registration or One-Stop Shop registration is used, which results in the customer's local VAT rate being charged

Note

You can't set a tax override specifically for Northern Ireland. UK tax overrides affect all UK orders.

Set up your VAT registrations for the EU

After you've registered with a tax authority and have your EU VAT number or your UK VAT number, you can set up your EU taxes. You only need to perform this task once.

Steps:

1. From the Shopify admin, go to Settings > Taxes and duties.
2. In the Countries/regions section, click European Union.
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 select Northern Ireland Protocol from the country list, and then enter your VAT number from the country where you're registered. 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 select Northern Ireland Protocol from the country list, and then enter your VAT number from your home country. Click Collect VAT.
   • If you selected Country-specific registration, then select Northern Ireland Protocol from the country list, and then enter your VAT number from the country where you're registered. Click Collect VAT. If you need to add additional VAT registrations, then click Add country on the VAT on sales within the EU page.

After you set up your tax regions, then you can create tax overrides for products where the default tax rates don't apply.

Tax overrides set for EU member countries affect orders in the following examples:

• Orders that are placed in an EU member country and that are shipped from an EU member country, including Northern Ireland.
• Orders that are placed from a customer in an EU member country to a merchant in Northern Ireland if Country-specific registration or One-Stop Shop registration is used, which results in the customer's local VAT rate being charged.

Caution

If you're located in the EU or you collect VAT on sales within the EU, then collecting VAT when you ship to customers in the EU from outside of the EU isn't supported.

Manage your VAT registrations

If your store is located in Northern Ireland and you charged VAT to EU customers as soon as Brexit tax laws came into force, then your registrations are entered as Country-specific registration. You can change your registrations to One-Stop Shop registration or Micro-business exemption.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.
2. In the Countries/regions section, click European Union.
3. In the VAT on sales within the EU section click Change registration.
4. Do one of the following:
   • 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 Northern Ireland Protocol from the country list, select One-Stop Shop registration, and then enter your VAT number from the country where you're registered. Click Collect VAT.
   • 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, select Northern Ireland Protocol from the country list, and then enter your VAT number from your home country. Click Collect VAT.
5. Click Save.