Learn all about Shopify Tax: Simplify VAT management for Shopify stores.
Managing VAT can be complex for online stores, especially when it comes to complying with European and British tax regulations. Shopify is responding to this challenge by launching Shopify Tax, a tool designed to simplify tax compliance and ease the administrative burden for merchants.
Recently, Shopify Tax has been the default tax system for new users in these regions, offering advanced and intuitive features that make tax management easy for merchants of all sizes.
Why Shopify Tax?
VAT compliance is a major concern for European e-retailers, as it involves accurate calculations and rigorous management of registration thresholds. Shopify Tax meets these needs by automating VAT management, allowing merchants to focus on developing their business rather than on administrative tasks. By reducing compliance complexity, Shopify Tax helps merchants easily comply with tax requirements while supporting their growth.
Key Shopify Tax Features
Shopify Tax offers powerful and practical tools that make VAT management more efficient:
- Smart calculations at the checkout : With accurate VAT calculations based on customer locations, product categories, and delivery options, merchants can be confident that amounts are always in line with local regulations. Shopify Tax automatically applies the correct VAT rate based on each country's rules, reducing errors and ensuring compliance.
- Monitoring of registration thresholds : VAT rules differ from country to country, and each country imposes specific thresholds beyond which a store must register locally for VAT. Shopify Tax sends automatic notifications to merchants when a country's thresholds are close to being exceeded, thus allowing the necessary measures to be taken and any penalties to be avoided.
- Compliant VAT invoices : Shopify Tax automatically generates, stores, and displays VAT invoices for customer orders and B2B transactions, making it easy to track and archive tax documents. Additionally, Shopify meets compliance standards, which ensures that all invoices meet legal requirements.
- Tax exemptions and easy configuration of specific rules : Shopify Tax takes into account tax exemptions and rules specific to certain product categories. For example, food or educational products may be subject to reduced VAT rates in some countries. Shopify Tax handles these details automatically, which ensures greater accuracy in VAT calculations.
Shopify Tax pricing
Currently, Shopify Tax is free for all merchants until December 31, 2024. Starting in 2025, pricing is structured to remain accessible to small and medium-sized stores:
- Free up to €100,000 in annual sales : Stores with up to $100,000 in annual sales will be able to continue using Shopify Tax for free.
- Over €100,000 in annual sales : For stores that exceed this threshold, Shopify will apply a 0.35% commission on sales exceeding €100,000 per year, with a maximum of €5,000 per year. This pricing model is designed to ensure that fast-growing stores can benefit from Shopify Tax while keeping costs under control.
This progressive pricing allows stores to benefit from the advanced features of Shopify Tax at no additional cost during development and at a reasonable rate when their business reaches higher volumes.
Flexibility with the “Manual Tax” option for shops equipped with an ERP
For stores that already manage their tax compliance via an ERP or an external partner such as Regulo, Shopify offers the possibility to switch to mode Manual Tax. This option allows you to deactivate Shopify Tax and manage taxes manually, ensuring seamless integration with existing systems. By choosing Manual Tax, stores can continue to use their usual tools for calculating taxes, while taking advantage of Shopify's other features for managing their store.
Specific considerations for Shopify Tax in the European Union and the United Kingdom
Although Shopify Tax covers a wide range of cases for European and British stores, there are some exceptions where Shopify Tax cannot perform automatic calculations. In these cases, the VAT calculation is based on the store's tax registration. Here are the scenarios where Shopify Tax doesn't support VAT calculations:
- Orders shipped to a location outside of the European Union or the United Kingdom.
- Orders for which VAT is paid in Portugal, due to regulatory specificities.
- Orders for which VAT billing is not enabled.
- Orders for which VAT is not collected or calculated. If VAT is calculated but equal to zero, invoices are still generated.
- Orders for which customs fees are calculated.
These restrictions allow merchants to better understand situations where manual adjustments may be required and where Shopify Tax doesn't automatically take care of all calculations.
Need help managing VAT on your Shopify store?
Axome is there to support you in the integration of Shopify Tax and to adapt this solution according to your specific needs. Our team of experts is available to advise you and help you get the most out of Shopify Tax, whether you choose to use the automated option or Manual Tax for custom management. Do not hesitate to contact us to find out more and obtain a solution that is perfectly aligned with your business.
