VAT handbook for Shopify stores in the EU
When running a Shopify store based in European Union, it is important to understand basics of VAT in European Union - when to charge and which VAT rate to apply.
When starting a business, you are mostly not required to register for VAT. However, once your annual turnover exceeds a certain threshold, you are required to file and pay VAT.
In this article, we’ll cover when you need to register for VAT and the different reporting requirements based on where your customers are located.
My business is not VAT-registered
As not VAT-registered subject you are not charging VAT when selling within European Union.
Taxable turnover monitoring
VAT is not required to be collected or remitted if your annual turnover for the past twelve months is below the country’s VAT filing requirements.
In the United Kingdom, you are required to register for VAT once annual turnover exceeds £90,000. However, using the EU One-Stop Shop portal has a lower threshold of €10,000. Your resident location can also dictate when VAT registration is required. Many countries have annual turnover thresholds between €35,000 and €100,000.
My business is VAT-registered
There are two factors that determine if you should charge VAT or not: the home location of your customer and the type of customer. Here’s a chart that breaks down when you should collect VAT based on location and customer type:
| Selling destination | Consumers (B2C) | Businesses (B2B) |
|---|---|---|
| Same EU Country | VAT | VAT |
| Different EU Country | VAT | No VAT |
| Outside of the EU | No VAT | No VAT |
Customers in the Same EU Country
For customers (B2C) and businesses (B2B) in your home country, you should charge VAT and your local VAT rate is used.
Charging VAT applies for both physical and digital products.
Customers in a Different EU Country
Charging VAT to customers outside of your home location will depend on the type of customer. Selling directly to other businesses will not trigger VAT while selling to consumers will have applicable VAT.
Under the EU One-Stop Shop portal, Shopify businesses with an annual turnover under €10,000 are not required to register or collect VAT. Once this threshold is exceeded, you can register and pay taxes through the portal in one single EU country, even if you sell to other EU countries.
Customers Outside of the EU
VAT is not applicable to sales to countries outside of the EU. You will not collect or remit any taxes on these sales. However, you still may be required to report the sales to these countries, with no VAT liability.
VAT Exemption is based on customer's VAT registration number which must be filled in Shopify during the shoping. To allow your customers to enter their VAT registration number and become automatically tax-exempt,