For many, a less enjoyable part of entrepreneurship: you have to pay value-added tax (VAT) on your sales. You report this in your VAT declarations to the tax authorities. This also applies if you want to sell through Shopify. Although it is administratively difficult, it is important to know how it works (for example, to prevent fines!). We explain it to you in this article!
Setting up VAT on Shopify
Before you start selling through Shopify, you need to know how much tax you will be charging. Are you planning to sell in multiple EU countries or keep stock there? Then you probably need to apply for a VAT number in those countries. Once you have a VAT number, you can set up your Shopify account to use the correct VAT rates for your products. You do this as follows:
- Go to Settings in the Shopify management center, then to Customs and taxes.
- Select “European Union”.
- Select “VAT on sales within the EU” and then “Add country”.
- Select the country where you are registered as a business.
- Enter your VAT identification number and select Add country.
- If you want to add multiple numbers, select “Collect VAT”. This step is optional!
Did you make a mistake, or want to delete one? Click on the 3 dots next to the name and account number of the country under “Tax registrations”.
European VAT settings within Shopify
- One Stop Shop registration: for if you want to declare in one go for all the countries you sell into. You can still choose this option if you send products from outside the EU to an EU country, and charge VAT on orders up to 150 euros. If this applies to you, you can supplement your settings with your Import One Stop Shop (IOSS) number.
- Country-specific registration: for if you want to file a VAT registration with the local tax authorities for each EU country.
- Micro-enterprise exemption: this option is for the smaller entrepreneur, who stays below the European threshold amount of 10,000 euros (for distance sales within the EU). These entrepreneurs can continue to charge Dutch VAT.
VAT calculation service from Shopify
Filing VAT returns on sales via Shopify
- The first way is to declare your tax with the local authorities (the “country-specific registration”). Suppose you sell to Italian, French and Spanish customers: then you have to have a VAT number with the tax authorities of each of these countries as well as periodically declare VAT. Read more about it in this article.
- The second option is VAT declaration via the One Stop Shop. You qualify for this if you sell more than 10,000 euros annually across the border. You then do not have to file a declaration with different local tax authorities, but you have to file a quarterly declaration with the tax authority of the country in which you are located. Read more about it here.