Hi, I’m Djimi, the Tech Support Lead at Sufio,
and today I will show you how to ,set up taxes in Shopify
if your store is based in the EU.,If you are a Shopify store owner based in the EU,
you need to know when to charge VAT,and what tax rate applies to which customer.,In this video, you will learn how taxes work for stores based in the EU and how to set them up in Shopify.,The most important distinction for charging VAT
is whether your business is VAT registered or not.,Many businesses start as unregistered, especially if the taxable turnover in the last twelve months has been less than,the VAT threshold of the country in which the store is based.,In such a case, you would not have to register for VAT,
and it means that you do not charge VAT on your sales, ,regardless of where your customers come from.,Once your annual taxable turnover reaches
this VAT threshold, you have to register for VAT,,and you will start charging VAT on some of your sales, depending on where your customers buy from.,And then, you will also have to include your VAT registration number on your invoices and receipts to make them valid.,Suppose you are VAT registered.,When selling to customers in the same country
as your store, you are required to charge VAT.,If you’re selling to a different country within the EU,,you have to distinguish whether you are
selling to a consumer or a business.,When selling directly to consumers, you should always charge VAT.,However, you should tax-exempt businesses
registered in other EU countries,,which means not charging VAT on B2B sales
outside your home country.,Lastly, if your customer resides outside the EU,
you do not charge VAT.,On such orders, you will need to report the sales VAT
for taxation purposes, as sales with 0% VAT.,Now, let’s look at what tax rate applies to which customer.,When selling to customers in your home country,
you should use the applicable VAT rate in your country.,When selling to consumers, that is, non-VAT registered
customers from other EU countries,,the VAT rate you should charge depends
on the type of VAT registration you have applied for.,If you sell to customers in the EU,and your taxable turnover during a calendar
year to all other EU countries combined ,does not exceed the threshold of 10,000 euros excluding VAT,,you may qualify for a so-called micro-business exemption.,To use this taxation scheme, you need
to apply for it at your local tax authority,and only have a single VAT registration in the European Union.,Once you apply for it, you will charge the VAT rate of the country
your business is based in on all your sales within the EU.,Let's illustrate this with an example.,Suppose you have a business based in Germany,
and you received an order from a customer in Spain.,Under the micro-business taxation scheme,
you will charge the German VAT rate.,But what if your taxable turnover outside the country your store,is based in but still within the EU equals to or exceeds
the threshold of €10,000 excluding VAT?,In such a case, you will need to register for VAT
in each country you are selling to and pay their VAT rate.,This means that customers from different EU countries will be charged with varying VAT rates, ranging from 17% to 27%.,For example, suppose you have a business based in Germany, and you offer goods to consumers in Belgium and France. ,However, during a calendar year, you have surpassed the VAT threshold of 10,000 euros selling in Belgium. ,Due to this, you will have to register for VAT
in both Belgium and France,,and you will also have to charge Belgium VAT on goods sold in Belgium and French VAT on goods sold in France.,When breaching the threshold, registering for VAT in each EU country can become time-consuming and quite complicated.,For this reason, you can choose to use the One-Stop Shop
Union scheme, also known as OSS.,This will allow you to submit a single
VAT return for all your sales within the EU,whilst still retaining the ability to charge different VAT rates
to EU customers, varying from country to country.,Remember; these rules only apply to B2C,
that is, non-VAT registered consumers only.,When selling to businesses with a valid VAT registration
number in other EU countries, you do not charge VAT.,Such customers should be set as tax-exempt in your Shopify store.,Moreover, you should capture and validate their VAT registration numbers before allowing them to purchase your products.,Sufio can help you capture and validate EU VAT numbers
from your business customers in your Shopify store,and, if applicable, set them as tax-exempt.,In addition, you will be able to include the VAT numbers
of your customers on your invoices,so that they are valid and compliant with accounting legislation.,Alright, now that we’ve looked at how taxes work in the EU,
let me show you how to set them up in your Shopify store.,To be able to charge VAT to some customers and not to others,,Shopify allows you to choose from two possible configurations.,These are based on how you want to display
product prices in your online store.,Let's have a look at them together. ,In your Shopify admin, go to the Settings → Taxes and duties page.,On the bottom, in the Tax calculation section, ,we can find a checkbox that allows us to indicate
whether our product prices include tax or not.,In other words, if the product prices that we entered
on the Products page include or exclude tax.,Now, if this checkbox should or shouldn't be
checked primarily depends on,who you are selling to and what
the legislation in your home country suggests.,In case your sales are predominantly to B2B customers, you can most probably have your product prices as VAT excluded,,so you can uncheck this option to indicate such a thing.,On the other hand, if you are selling primarily to consumers,,or the legislation in your country requires
you to display tax-inclusive product pricing,,you can check this checkbox to indicate
that your product prices are VAT included.,However, if you're selling to both B2B and B2C customers,,and you want them to have the ability
to be tax-exempt when applicable,,make sure that the Include or exclude tax based
on customer's country checkbox is checked.,To do that, head over to the Markets page, click on Preferences,and check the Include or exclude tax based
on your customer’s country checkbox.,Don't forget to save your changes.,At this point, your product prices should be all set.,Now let's look at how you can set up your store so that
you can charge your customers the correct VAT rates.,Shopify calculates tax rates automatically based
on the type of registration you specify in your tax settings.,Let me show you how to set it up.,In your Shopify admin, go to the Settings → Taxes and duties page.,Here in the Countries/regions section, click on
European Union, and finally, click the Collect VAT button.,Now, you’re presented with three different
options for the type of VAT registration you have.,As we've discussed earlier in this video, if your taxable
turnover outside the country your store is based in,but still within the EU equals to or exceeds
the threshold of €10,000 excluding VAT,,and you applied for the One-Stop Shop taxation
scheme to submit a single VAT return,,choose the One-Stop Shop registration option.,This will make sure that your Shopify store charges
VAT at the rates of the countries you ship to.,If you haven't surpassed this threshold and
applied for the Micro-business exemption,,select the second option to charge
your domestic VAT rate on all your orders.,If you hold a VAT registration in all EU countries you ship to ,and continue submitting VAT returns in each country separately,,choose the Country-specific registration option.,After that, click Next, and from the dropdown, select
the country where your VAT registration is based,,and enter your VAT number in the field below.,In case you have applied for a VAT number
but don't have one yet, leave this field blank.,You can update it later when you receive it.,Finally, confirm your settings
by clicking on the Collect VAT button. ,This will save your settings.,To add your VAT number when you are assigned one
at a later date, click here, and select Edit VAT number. ,If you have chosen the Country-specific registration scheme, ,use the Add country button below to add
additional countries you are registered in.,If the type of your VAT registration ever changes — for example,,when you apply for OSS after reaching the 10,000 euro threshold,— don’t forget to update your settings using
the Change registration button here.,Apart from setting up your tax rates correctly in your online store,,it is essential to also issue valid invoices
for your bookkeeping and tax purposes.,With Sufio installed in your Shopify store, you can
create compliant, brand-focused invoices,tailored to your business that will include
the detailed breakdown of the charged VAT,and all the necessary details to make them
compliant with the invoicing legislation in the EU.,What's more, if you're selling abroad,
Sufio will help you issue and send,professionally translated invoices
automatically in over 30 languages.,I hope you found this video helpful
in understanding VAT rules in the EU,and setting up your Shopify store to charge the correct tax rates.,If you have questions about any of the steps that we talked about,,make sure to leave a comment and
we'll do our best to get back to you.,Thanks so much for watching, I am Djimi,
and I wish you best of luck with your online business.
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