How to set up EU taxes in your Shopify store in 2024

Summary

In this video, Djimi, the Tech Support Lead at Sufio, walks Shopify store owners based in the EU through the process of setting up VAT for their online stores. He explains the distinction between VAT-registered and non-registered businesses, outlines how VAT applies to domestic and international sales, and discusses the One-Stop Shop (OSS) and Micro-business exemption schemes. Djimi also guides users through configuring tax settings in Shopify to ensure the correct VAT rates are charged. Additionally, Sufio’s features for handling VAT numbers and creating compliant invoices are highlighted, offering users a comprehensive understanding of EU VAT rules and Shopify integration.

Takeaways

• 😀 VAT registration is essential for EU-based businesses, depending on taxable turnover.
• 😀 If your taxable turnover in the last 12 months is below the VAT threshold, you don’t need to charge VAT.
• 😀 Once your taxable turnover exceeds the VAT threshold, you must register for VAT and start charging VAT where applicable.
• 😀 When VAT-registered, charge VAT on sales within your home country and to consumers in other EU countries.
• 😀 For B2B sales within the EU, VAT should not be charged if the buyer is VAT-registered in their own country.
• 😀 No VAT should be charged for customers residing outside the EU, but sales with 0% VAT should be reported.
• 😀 If your taxable turnover exceeds €10,000 in sales to other EU countries, you must register for VAT in each country or use the One-Stop Shop (OSS).
• 😀 The OSS scheme allows you to submit a single VAT return for all EU sales, simplifying VAT compliance.
• 😀 If you sell to both B2B and B2C customers, ensure that your Shopify store is set to exclude tax for business customers and apply VAT for consumers.
• 😀 Shopify allows you to configure VAT settings based on product pricing and customer location for accurate tax calculations and compliance.

Q & A

What is the first thing you need to know when setting up taxes in Shopify for a store based in the EU?

The most important thing is whether your business is VAT registered or not, as this determines when and how you charge VAT.

Do businesses always have to charge VAT on their sales in the EU?

No, businesses that are not VAT registered, typically due to having a taxable turnover below the VAT threshold of their country, do not need to charge VAT.

What happens once your business surpasses the VAT registration threshold?

Once your business surpasses the VAT threshold, you must register for VAT and start charging VAT on your sales, depending on where your customers are located.

When do you need to charge VAT on sales within the EU?

You must charge VAT on sales made to customers in the same country as your store, but you do not charge VAT on B2B sales outside your home country to VAT registered businesses.

How does VAT work when selling to customers outside the EU?

You do not charge VAT on sales to customers outside the EU. These sales should be reported as sales with 0% VAT for taxation purposes.

What is the micro-business exemption in the EU VAT rules?

If your taxable turnover to other EU countries is below 10,000 euros excluding VAT, you may qualify for the micro-business exemption, allowing you to charge the VAT rate of your home country on all EU sales.

What should happen if your taxable turnover to other EU countries exceeds 10,000 euros?

If your taxable turnover exceeds 10,000 euros, you need to register for VAT in each country you sell to, and charge the respective VAT rates of those countries.

What is the One-Stop Shop (OSS) Union scheme?

The One-Stop Shop (OSS) Union scheme allows businesses to submit a single VAT return for all EU sales, helping simplify VAT compliance while charging the correct VAT rates for each EU country.

How do you set up taxes in your Shopify store based on your VAT registration?

You can select from different VAT registration options in Shopify under Settings → Taxes and Duties, based on whether you use OSS, a micro-business exemption, or country-specific registration.

What additional feature does Sufio offer to help with VAT registration in Shopify?

Sufio helps capture and validate EU VAT numbers from business customers, allowing you to set them as tax-exempt in Shopify, and ensures your invoices comply with EU legislation.