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How to set VAT settings
How to set VAT settings

Short guide to set VAT settings correctly in Shopify

Updated over a month ago

PL - How we handle your Shopify VAT settings?

When retrieving tax rates for items (products or shipping) from Shopify, follow these rules:

  1. Use the First Applied Tax Rate

    • Only consider the first tax rate applied to an item (product or shipping). Ignore additional tax rates.

  2. Tax Exempt Orders

    • If the order is tax-exempt, mark it as "zw" - You can make an order tax exempt in these ways:

      • A -

      • B -

  3. No Applied Tax

    • If no tax is applied, mark it as "disabled".

  4. Tax Percentage

    • If tax is applied, record the rate as a percentage (e.g., "20%").

Non-payers of VAT

How to set up Shopify

In Settings » Taxes & Duties, make sure you are not collecting taxes in any area:

VAT payers

Up to 10 000 EUR turnover

Under this scheme, you charge all EU customers the same VAT rate based on your home country.

How to set up Shopify

1. In Settings » Taxes & Duties, click on the European Union area

2. Click on "Collect VAT" and select "Exemption for micro-businesses"

3. Enter your VAT number and save

4. Check if you have checked the option "Include sales tax in product price and shipping rate" in Settings->Taxes and duties.

OSS mode

Under this scheme, you charge EU customers the VAT rate for their country, but only pay the tax in your home country.

How to set up Shopify

1. In Settings->Taxes & Duties, click on the European Union area

2. Click on "Collect VAT" and select "One-Stop Shop Registration"

3. Enter your VAT number and save

4. Check if you have checked the option "Include sales tax in product price and shipping rate" in Settings->Taxes and duties.

Taxation in each country separately

Under this scheme, you charge EU customers the VAT rate according to their country, and you also pay the tax in each country where you need to be registered.

How to set up Shopify

1. In Settings->Taxes & Duties, click on the European Union area

2. Click on "Collect VAT" and select "Register for specific countries"

3. Enter your VAT number and save

4. Add your other VAT numbers for all countries where you are registered for VAT.

5. Check if you have checked the option "Include sales tax in product price and shipping rate" in Settings->Taxes and duties.

B2B and Reverse charge

Applies if you sell goods to foreign business customers who have a VAT number. In this case the goods are invoiced without VAT.

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Exemption:

If a business is generally tax-exempt but has one taxable product, there are two ways to manage this in Shopify:

  1. Using an Exempt Collection:

    • Create a product collection that includes all tax-exempt products.

    • Apply a 0% tax rate to this collection using Product overrides in Shopify’s tax settings.

    • The product that is not part of this collection will be taxed at the standard rate.

  2. Setting Individual Product Exemptions:

    • Instead of using a collection, manually uncheck the "Charge taxes on this product" option for each exempt product.

    • This method works for a small number of products but is less efficient if multiple exemptions need to be managed.

The first approach is more scalable and ensures tax exemptions are consistently applied without adjusting each product individually.
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