Note: The below-given instructions are applicable within e-stores created with Online Store and Advanced Store plans. You can change your plan anytime 🚀

If you’re a VAT-registered business based in the European Union, you’re most likely required to pay value-added tax (VAT). You can set up your store according to the EU VAT rules:

  • Charge VAT to your customers.

  • Apply reverse charge when selling to another EU VAT registered business.

  • Enter prices with VAT included.

  • Generate tax invoices.

  • Display your VAT ID number on tax invoices.

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Charging VAT from your customers

You can use automatic tax settings to calculate the tax rates automatically based on the store and customer's location and include VAT into product prices. These tax settings use standard general sales tax rates, which are updated regularly. At checkout, the customer will be charged a proper VAT rate according to the country and regional tax rules.

To enable automatic tax rates:

1. Add your company address in your store manager's Settings → General → Store profile.

2. Enable automatic tax calculations in the Settings → Taxes & Invoices:

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Once the automatic tax rates are enabled, your store will automatically charge the proper VAT amount to your customers.

Only standard VAT rates are supported by the automatic calculation scheme at the moment. If you are required to charge a reduced rate or have zero-rated products in your store, we recommend disabling the automatic rates and setting up manual tax rates.

New rules on cross-border VAT for e-commerce (effective after July 1, 2021)

If you are selling goods and services online across the EU, then you are affected by the new rules that come into force on July 1, 2021. You are also affected by part of these rules if you are selling goods that are to be imported from outside the EU (no matter where your company is based). The new EU VAT rules aim at facilitating cross-border sales and taxation. By bringing simplicity and unification into this complex area, they are conceived to save time — so that you can devote it to your business.

The changes include:

  • The new €10 000 threshold for cross-border sales within the EU. Before, there used to be different thresholds for different countries, now you have one common threshold. If you are based in the EU and your total distant sales are under €10 000 in each of the last two years, you can charge the VAT of your country on all sales across the EU. If your total distant sales are over €10 000, you need to charge the VAT of the country of your customer (there are different rates across the EU Member States).

  • Registering with the new One Stop Shop (OSS). Before, you had to be VAT-registered in every EU country you sell to once you have reached a certain amount of sales — individual for every country. Now you need to register in one EU Member State only (e.g., your state). That will be enough to declare and pay VAT for all your cross-border sales. First, it hugely decreases the amount of work & effort. Second, you can now operate in your native language. Check out the online OSS portal for your country.

Learn more: VAT for e-commerce 💡

Here’s what you need to do to prepare your store for the forthcoming changes:

1. In case your total yearly distant sales across the EU are over €10 000, then you need to either turn on automatic taxes so that the rates are calculated for your store automatically (that’s the recommended option), or you can set up manual taxes according to our instruction. While setting up manual taxes, you will need to assign a corresponding VAT rate to each destination zone (EU Member State) that you sell to. You can simply create one tax, name it “VAT”, then create a separate zone for each of the EU states (Italy, Germany, and France in our example) and set tax rates for them in the Rates per zone section:

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Note: It is recommended to set tax rates for all the EU Member States, even if for now you don’t have customers from some of them.

2. In case your total yearly distant sales across the EU are under €10 000, then you can charge your domestic VAT rates when selling to the other EU Member States. If your business is not VAT-exempt (applicable for SMEs), you need to make sure that the tax rate of your country is set up manually in your store for all the EU countries that you sell to.

In case you are not sure which rules apply to you, please, consult with a tax professional.


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