Set up VAT and GST collection in Shopify
VAT and GST are the same kind of tax under different names: a consumption tax charged at each stage, where only the final customer bears the cost. In Shopify you register for each one where you are registered with the tax authority, and the platform then charges the right rate at checkout. The part that trips stores up is the cross-border rule, where a single threshold changes which rate applies.
Written · Shopify admin, desktop steps · 6 minutes read
The worked example
| EU order | €200.00, VAT 20% = €40.00, total €240.00 |
| Canadian order | $200.00, GST 5% = $10.00, total $210.00 |
| EU cross-border threshold | €10,000 a year |
| Below the threshold | Home country VAT rate |
| Above the threshold | Customer's country VAT rate, via OSS |
| IOSS limit | Imports of €150 or less |
Download the record: eu-vat-registration-checklist.csv (237 bytes).
A checklist of the registrations in this tutorial, with the VAT or GST on a €200.00 or $200.00 order and the order total for each. Each row stands on its own; the euro rows and the Canadian row use different currencies.
1Register with your own country's tax authority first
Typically, if you intend to sell to other countries in the EU, you need to register with the tax authorities in your own country to charge VAT. In Canada, register for a GST/HST account with the Canada Revenue Agency once your taxable sales pass the threshold.
2Add a local VAT registration in Shopify
From your Shopify admin, go to Settings > Taxes and duties. In the Regional settings section, click European Union. Under Collect VAT in an EU country, click Collect VAT, select your country and enter your VAT number.
3Decide whether cross-border sales need OSS
If your annual sales to all other EU member countries are less than €10,000, you can use the micro-business exemption and charge your local VAT rate, or register for the One-Stop Shop (OSS) if you want to charge VAT based on the location of your customers. Above €10,000, the VAT rate of your customer's country is charged, and you need an OSS registration or a registration in that country.
4Add the OSS registration
In the Collect VAT cross-border section, click Collect VAT. Select Collect using a One Stop Shop (OSS) registration, select the country where you have an OSS registration, and enter your VAT number. You can only use OSS if your store uses the Basic Tax or Shopify Tax service.
5Add IOSS for imports of €150 or less
If you are located outside the European Union and sell physical goods of €150 or less into the EU, you can collect VAT at checkout using IOSS, so the customer does not pay import VAT on delivery. For orders above €150, import VAT and duties are applied and are typically collected by the carrier on delivery.
6Add your Canadian GST registration
In Settings > Taxes and duties, click Canada, then Collect sales tax, select the region and enter your registered tax number. Provincial taxes in British Columbia, Manitoba, Quebec, and Saskatchewan need their own registrations on top of GST.
The arithmetic
The 20% rate is the UK standard VAT rate used as the example; the Canadian rate is the 5% GST:
| Order | Rate | Tax | Customer pays |
|---|---|---|---|
| €200.00, EU local VAT | 20% | €40.00 | €240.00 |
| €200.00, EU OSS cross-border | 20% | €40.00 | €240.00 |
| $200.00, Canada GST | 5% | $10.00 | $210.00 |
| €9,400 cross-border sales in a year | Below €10,000 | Home rate | €600.00 under threshold |
| €10,600 cross-border sales in a year | Above €10,000 | Destination rate | €600.00 over threshold |
The threshold is one figure for the whole EU, not per country. As of 1 July 2021, the old per-country distance selling thresholds no longer apply, and a single threshold of €10,000 applies for the entire EU.
Held at the counter
Shopify charges the tax, it does not file it. Adding a VAT or GST registration makes Shopify collect the right amount at checkout. Filing the return and paying the tax authority is still your job, in every country except where Shopify-managed filing applies.
OSS does not cover local sales. Local sales require a local tax registration for that country, and are not covered by the OSS. An OSS registration alone leaves your home-country sales unregistered.
OSS and IOSS cannot run together. Shopify cannot run OSS and IOSS together, and IOSS cannot be active at checkout at the same time as Shopify's duties feature. Pick the scheme that matches where your stock sits and who your customers are.
Sources
- Setting up EU taxes — Shopify's help pages: the €10,000 threshold, the micro-business and OSS registration steps, and the IOSS €150 rule.
- Tax services in the EU — Shopify's help pages: the registration types table, the rule that local sales need a local registration, and the note that OSS needs Basic Tax or Shopify Tax.
- Manage your Canadian taxes — Shopify's help pages: adding and editing Canadian registrations and the provinces with separate provincial taxes.