How do I charge VAT in Shopify for EU customers?

Charging VAT correctly in Shopify for EU customers is important for staying compliant with European tax laws and avoiding penalties. Shopify provides built-in VAT tools that automatically calculate tax at checkout based on your business location, your customer’s country, and your VAT registration method.

How VAT Works for EU Orders in Shopify

Shopify applies VAT based on where your business is located, where your customer lives, and whether your yearly cross-border EU sales exceed the €10,000 threshold. Depending on these factors, VAT can be charged using local VAT registration, OSS, micro-business rules, or IOSS for non-EU sellers.

Who Must Charge VAT for EU Customers

• EU-based stores must charge VAT in their home country
• EU stores must charge destination-country VAT when cross-border sales exceed €10,000 per year
• Non-EU stores can optionally collect VAT using IOSS for orders up to €150
• Without IOSS, EU customers pay VAT on delivery

VAT Collection Methods Available in Shopify

Enable Local VAT Registration

1. Go to Settings → Taxes and duties
2. Under Tax regions, click European Union
3. In the Collect VAT in an EU country section, click Collect VAT
4. Select your VAT-registered country
5. Enter your VAT number
6. Click Collect VAT to save

Enable OSS (One-Stop Shop)

1. Go to Settings → Taxes and duties
2. Under Tax regions, click European Union
3. In the Collect VAT cross-border section, click Collect VAT
4. Select Collect using a One Stop Shop (OSS) registration
5. Choose your OSS country and enter VAT number
6. Click Collect VAT

Enable Micro-Business VAT

1. Go to Settings → Taxes and duties
2. Under Tax regions, click European Union
3. In the Collect VAT cross-border section, click Collect VAT
4. Select Collect using your home country registration
5. Enter VAT number
6. Click Collect VAT

Set Up IOSS for Non-EU Businesses

IOSS allows non-EU stores to collect VAT at checkout for EU orders up to €150 so customers do not pay VAT on delivery.

1. Register for IOSS in an EU member state
2. Go to Settings → Taxes and duties
3. Under Tax regions, click European Union
4. In the Collect on orders shipping to the EU (IOSS) section, click Collect import VAT
5. Enter your IOSS number
6. Click Save

How VAT Rates Are Applied

Final Recommendation

Monitor yearly EU sales, keep VAT registrations updated, and test checkout regularly. Using Shopify Tax with OSS or IOSS provides the most reliable VAT compliance for EU-focused Shopify stores.