If you sell in the European Union or the United Kingdom, you know that managing the necessary value-added tax (VAT) only becomes more complicated as you grow. That’s why we launched Shopify Tax in the EU and UK—to simplify VAT compliance for Shopify merchants selling locally and abroad.
Every merchant dreams of expanding beyond borders, reaching more customers, and growing sales. However, VAT compliance can be a barrier to turning these dreams into reality. The European tax landscape is not a one-size-fits-all model. Different countries have tailored VAT rates and additional compliance requirements for various products, making it essential to collect the correct amount for compliance.
What is Shopify Tax?
Shopify Tax is a built-in tax solution that offers a high level of tax compliance with minimal upkeep for merchants selling to customers in the European Union and the United Kingdom. This changes the game by helping merchants:
- Automate VAT invoicing for B2B and B2C orders
- Understand where and when to register and collect VAT as they grow
- Calculate product-specific VAT based on product category
- Generate accurate reports to easily remit collected VAT to authorities
This suite of features helps merchants stay compliant and streamline operations, allowing organizations to spend more time and money on growth and less on complicated tax rules.
Shopify merchant Sarah Lowther, CEO and cofounder of NI Candle Supplies, shared, “Shopify Tax has transformed our tax management into a seamless process and allowed us to focus more on growing our business. It’s a game-changer for anyone looking to streamline their operations and ensure peace of mind when it comes to tax obligations.”
Key features of Shopify Tax
VAT invoices
A tedious task related to compliance is VAT invoicing. This is a requirement for all cross-border orders for B2B and B2C customers. Finding an invoice provider, paying hundreds or even thousands each month, and needing to send invoices to customers can be a burden on merchants' wallets and time.
Shopify Tax has helped us save time and money by automating the invoicing process directly in Shopify.
Julian Essig, founder and CEO, first digi
Automated VAT invoicing saves time and reduces human error, covering 26 EU countries as well as the UK, and integrating seamlessly into existing processes. Buyers can access invoices after they check out, without any additional action needed from you.
Julian Essig, first digi founder and CEO, believes, "Shopify Tax has helped us save time and money by automating the invoicing process directly in Shopify, so I don't need external tools anymore.”
Tax liability insights
Tracking your thresholds, liabilities, and registrations can feel like a never-ending chore. With Shopify Tax, you’ll never have to track these on your own again. A streamlined dashboard shows you where you need to register to collect VAT and when, by intelligently considering your sales, customers, and current registrations.
Each business is unique, so the tax liability insights empower you to make informed decisions alongside your accountant or trusted tax professional.
Automated VAT calculations
Once you register in a new country or region, it’s time to start collecting VAT. However, figuring out those rates can feel like a tax-themed escape room. In the EU and UK, different rules govern the amount of VAT you’re liable to collect on your product, and some product-specific exemptions can be surprising.
Take the UK's VAT, for example. HMRC, the UK's tax, payments and customs authority, states that VAT is exempt on items “essential” in nature. It makes sense that food and children's clothing get a pass, but did you know that bingo, edible cake decorations, and even exotic meats (crocodile, anyone?) are also considered a necessity?
That’s where Shopify Tax comes in. No more poring over product-specific VAT rates and exemption rules in each country where you sell. Shopify Tax automatically calculates and collects VAT based on your product categories and your customers’ locations.
Even as rules and regulations change, you can have peace of mind Shopify Tax will automatically keep VAT rates up to date, so you don’t have to.
How Shopify is building for the future
For aspiring entrepreneurs, the allure of building an online store or expanding across borders often dims when faced with VAT challenges. Shopify Tax in the EU and UK provides the tools to expand into European markets effortlessly.
Shopify's commitment to continuous improvement means new features such as reporting enhancements, greater invoice customization options, VAT ID validation, and more will be introduced in the future!
