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Create EU taxes in Shopify
Here's what to look for in the EU as a dealer in 2022
How to create EU taxes in Shopify and what to look out for as an EU merchant in 2022 is what you’ll learn in this Shopify tutorial. We explain when VAT must be taken into account and when not.
Create EU taxes in Shopify - Here's how
In this video, we will show you how to customize and set the taxes in Shopify that you need for a business in the EU. At this point it should be said that we want to inform with this video, but do not give legal tax advice. First of all, it should be noted that there are more than two relevant VAT rates for you as a merchant in the EU.
But when does which come into play?
The 4 options
This depends on whether it is a B2C or B2B customer and in which country they are located. These variables result in 4 combinations. The first option is – “The customer is located in the same country”. No distinction is made here as to whether the customer is a company or an end consumer. You must always show the VAT if you are subject to VAT. We will leave aside the case that you are a small business owner. The second option again splits into a third option, because if you are selling to another EU country, then it makes a difference if it is a B2C or B2B customer. For consumers, VAT is added, for businesses it is not. The fourth option, where also no VAT is applied, is the case when the customer is located in a non-EU country.
Create EU taxes in Shopify - Summary
In summary, this means that VAT is added in the same country, in other EU countries for end consumers as well, but not for companies. Regardless of whether you are an entrepreneur or an end consumer in another EU country – no value added tax applies here either. Now we know for which customers we have to charge VAT. But when is this 7%, when 19% and are there other tax rates?
Now it gets a little more complicated, so pay close attention.
Create EU Taxes in Shopify - Physical vs. Digital Goods
For this purpose, we distinguish between physical and digital goods. If a French end customer orders a physical product from you, you charge the German tax rate, i.e. 19%. However, if you exceed the EU delivery threshold of €10,000, which has been in effect since July 2021, then the sales tax of the country to which you are selling becomes due. This also means that a registration and a VAT return is necessary.
But what about digital goods, e.g. music downloads or software?
Here the value added tax of the customer applies. Shopify itself gives the following example.
“For example, if you’re a Dutch merchant and you sell a digital product to a customer in Germany, you have to charge the customer the German VAT rate of 19%.”
As a side note: Whether 19% or 7% has nothing to do with the country of the customer in our case, but with the products. For this purpose, you should generally have informed yourself in advance whether your product range, e.g., is suitable. consists of books, magazines or concert tickets.
Here's how you implement this in Shopify
But how do you implement this in Shopify?
As we have learned, not every customer has to pay VAT. Therefore, it would be counterproductive to display the VAT directly with the prices. I’ll show you how to get around that now. You go to the settings in your Shopify backend and there you go to “Taxes and duties”. By default, the checkmark is set at “All prices are displayed including taxes”. We take that out and save it. This way you keep the possibility open to charge VAT for consumers and not for businesses. We now set up the taxes for the physical goods. To do this, this time go to the settings sub-item “Shipping and delivery”. Here you create a new profile and in it a new shipping zone. Now you can select all EU countries that are not yet available. After you have saved, you will also see these countries in the tax settings, click on the country you want to configure and now enter the appropriate VAT rate.
For the digital goods, the setup is even easier. To do this, go back to the Tax and Customs settings and check the box “Collect VAT on digital products”.
Shopify agency eBakery
You are now familiar with this, know which taxes to collect and how to apply it all to Shopify. But as already mentioned, we do not give any guarantee for this and do not give any legal advice with this video. Where we as a Shopify agency are experts, however, is the store setup and optimization. If you need help with this, feel free to contact us.
Do you have questions or need an individual offer? Do not hesitate to contact us.
Haben Sie Fragen oder brauchen ein individuelles Angebot? Zögern Sie nicht, uns zu kontaktieren.
