EU Shopify Taxes: VAT, OSS & Compliance Explained
Boost Ecommerce Growth With Generative AI
Shopify

How to Deal with Taxes on Shopify: Taxes in Europe: VAT, OSS, and Compliance

Feb 20, 2025
10 min read

Introduction to Taxes on Shopify

VAT, OSS & Compliance for Shopify Merchants

The European tax system differs from the U.S. as it follows a Value-Added Tax (VAT) system instead of a sales tax model. VAT applies at every stage of the supply chain, and Shopify merchants selling in the EU must comply with VAT registration, collection, and reporting requirements.

This section covers:

Understanding VAT in the European Union

VAT registration requirements for Shopify sellers

One-Stop Shop (OSS) for EU-wide VAT compliance

How Shopify helps with VAT collection

How to file VAT and remain compliant

1. Understanding VAT in Europe

What is VAT (Value-Added Tax)?

A consumption tax applied to goods and services sold within the EU.

Collected at each stage of the supply chain (from manufacturer to retailer)

Merchants charge VAT at checkout and later remit it to the tax authorities.

VAT Rates in the EU

Standard VAT Rates: Usually 17%–27%, varying by country.

Reduced VAT Rates: Apply to specific goods (e.g., food, books).

Zero VAT: Some exports and services are exempt.

📌 List of VAT rates by countryEU VAT Rates

Who Needs to Register for VAT in Europe?

1️⃣ EU-based Shopify Merchants

✔ Must register for VAT in their home country before selling.

✔ Must charge VAT based on the customer’s location.

2️⃣ Non-EU Shopify Merchants Selling to EU Customers

✔ Must register for VAT if annual sales to the EU exceed €10,000.

✔ Can register for One-Stop Shop (OSS) to simplify VAT collection across all EU countries.

📌 What is the €10,000 threshold?

If total cross-border B2C sales within the EU exceed €10,000 per year, VAT must be collected at the buyer’s country rate.

If below €10,000, VAT can be charged based on the seller’s home country rate.

2. One-Stop Shop (OSS) for EU VAT Compliance

What is OSS?

The One-Stop Shop (OSS) system allows Shopify merchants to register in one EU country and collect VAT across all EU countries. This simplifies VAT collection and filing.

Benefits of Using OSS

No need to register in every EU country where you sell.

Collect and file VAT through a single registration in your home country.

Reduces administrative burden for cross-border sellers.

How to Register for OSS?

📌 Sign up for OSS via your home country’s tax authority.

✔ If based outside the EU, you must register in one EU country to use OSS.

📌 List of OSS registration links by countryEU VAT OSS Registration

3. Setting Up VAT Collection in Shopify

Step 1: Enable VAT in Shopify

1. Go to Shopify Admin → Settings → Taxes and Duties

2. Select “Set up VAT”

3. Add your VAT registration numbers

Step 2: Configure VAT Collection Rules

If registered for VAT OSS, Shopify will apply the correct VAT rates.

If below €10,000 in cross-border sales, VAT can be charged based on your home country.

Step 3: Display VAT at Checkout

Show prices including VAT (recommended for EU businesses).

✔ Shopify allows VAT-inclusive pricing based on customer location.

📌 Need VAT invoices? Use a VAT invoicing app like Sufio, Quaderno, or TaxJar.

4. VAT Compliance: Filing & Reporting

How to File VAT Returns in the EU

📌 If using OSS

✔ File a quarterly OSS VAT return in your home country.

✔ Report all EU-wide sales and VAT collected.

📌 If NOT using OSS:

✔ Register and file VAT individually in each country where you sell.

✔ Submit VAT returns based on the country’s tax rules.

VAT Reports in Shopify

1. Go to Shopify Admin → Analytics → Reports → Taxes

2. Download VAT reports by country

3. Use reports to file VAT with tax authorities

📌 Use Avalara or Quaderno for automated VAT reports & filing.

5. Common VAT Mistakes Shopify Merchants Should Avoid

🚫 Not Registering for VAT Before Selling in the EU
✔ If selling to EU customers, register before charging VAT.

🚫 Ignoring the €10,000 Cross-Border Sales Threshold
✔ If you exceed this amount, VAT must be charged at the buyer’s location rate.

🚫 Incorrectly Displaying VAT-Inclusive Pricing
✔ EU law requires VAT-inclusive pricing for B2C transactions.

🚫 Not Filing OSS VAT Returns on Time
✔ OSS returns are due quarterly—late submissions may result in penalties.

🚫 Assuming Shopify Automatically Files VAT for You
✔ Shopify collects VAT but does not file it—you must file it manually or use a VAT filing service.

6. Filing & Remitting Taxes Europe

🇪🇺 Europe: Filing VAT Returns

✔ If using OSS (One-Stop Shop), file a quarterly OSS return in your home country.

✔ If not using OSS, VAT must be filed in each country separately.

✔ Use Shopify’s VAT Reports to determine VAT collected.

✔ Use Quaderno or Avalara to automate VAT reporting.

📌 OSS VAT filing: EU VAT Portal

7. Additional Resources for Shopify Merchants

📌 Shopify Tax GuideShopify Taxes

📌 VAT Registration & Filing in the EUEU VAT Portal

🔹 Tax Compliance Apps for Shopify

Avalara (Global Tax Compliance) → Avalara

Quaderno (VAT for EU & Digital Products) → Quaderno

To know more about navigating taxes in the Shopify, read a more comprehensive post about Dealing with Taxes in shopify

Ready to Elevate Your Shopify Store?

If you need Shopify design, migration, or development support, our team of experts is here to help. We’ll work with you to create a seamless, high-converting store that aligns perfectly with your brand and business goals. Get in touch with us today to learn more about our services!

Mani Singla

Mani Singla

Mani Singla is a high-level Shopify consultant specializing in extending the platform beyond its standard capabilities. With deep expertise in custom development, advanced integrations, and eCommerce strategy, he helps businesses unlock Shopify’s full potential. Whether it’s optimizing store performance, building custom functionalities, or overcoming platform

YOU MAY ALSO LIKE