VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

INTRODUCTION

▸ If you are a Shopify store owner based in the European Union, it is important to understand when to charge VAT or even which rate applies to what customer. This article will help you understand this topic and correctly set up your store.

▸ The most important distinction for your business (the company used to run your store) is whether it is VAT-registered or not.

▸ Many businesses start as unregistered, but they need to register for VAT once their annual turnover (total sales) is above a certain threshold. This threshold is usually around €35,000 in some EU countries and €100,000 in others.

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

YOUR BUSINESS IS NOT VAT REGISTERED

▸ If your annual turnover is below the VAT registration limit of the country where your store is based, then most likely it is not VAT registered.

▸ This means that you do not charge VAT on your sales regardless of where your customers come from.

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

YOUR BUSINESS IS VAT REGISTERED

If your business is VAT registered, you have to charge VAT to some customers and not to others. You also need to include your VAT registration number on your invoices and receipts to make them valid.

There are two facts that determine whether you should or should not charge VAT — what is the country of your customer and whether you are selling to a consumer (B2C) or business (B2B).

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

CUSTOMERS FROM THE SAME COUNTRY

When selling to both consumers and businesses of your home country, you should always charge VAT and use the relevant VAT rate of your country.

A Germany-based store charges VAT to all German customers and to consumers from other EU countries

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

CUSTOMERS FROM DIFFERENT EU COUNTRIES

When selling to customers from EU countries other than your own, it is important to distinguish between consumer and business customers.

A Germany-based store charges VAT to all German customers and to consumers from other EU countries

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

CONSUMERS (B2C SALES)

▸ You should charge VAT when selling to consumers from other EU countries.

▸ You can use the VAT rate of your home country unless the total value of your sales to the customers country does not exceed a certain limit.

▸ If your annual sales to a specific country are more than the VAT threshold, you will need to register for a local VAT registration number and then charge the VAT rate of the customers country. VAT thresholds vary from state to state and are typically around €35,000 or €100,000 per year. Non-Eurozone countries will have the threshold in their local currency.

In such cases, your business will have multiple VAT registration numbers and you should make sure appropriate VAT numbers are always included on your invoices.

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

BUSINESSES (B2B SALES)

▸ You do not charge VAT when selling to businesses (companies with valid VAT numbers) from other EU countries.

▸ Such customers should be marked as tax exempt in your Shopify store. You should also make sure you capture and validate VAT registration numbers from your business customers before allowing them to purchase your products without VAT.

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

SUFIO IS THE SOLUTION

▸ Sufio allows you to easily capture and validate EU VAT numbers from your business customers and, when applicable, automatically set them as tax exempt.

▸ It also creates invoices that include all the necessary details to make them compliant with your invoicing legislation. Invoices can be used as valid documentation that your products moved to another EU member state.

TEXT

Invoice with both the store's and customer's VAT numbers

Invoice with both the store's and customer's VAT numbers

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

CUSTOMERS OUTSIDE THE EU

▸ VAT is not charged on goods when selling to customers outside of the EU.

▸ You will still need to report the sales for VAT and taxation purposes, but show them as sales with 0% VAT. Valid invoices, such as those created by Sufio, can serve as documentation that the goods were shipped outside of the EU.

VAT GUIDE FOR SHOPIFY STORES SELLING IN THE EU

ABOUT THE AUTHOR

▸ Sufio is the first invoicing app for Shopify stores that allows to capture VAT numbers from business customers and automatically set them as tax exempt.

▸ See how Sufio can make your invoicing more intelligent.

‣ Visit http://sufio.com/