Complete VAT Guide for EU Shopify Stores

Running a Shopify store in the EU and confused about VAT? You’re not alone. After helping hundreds of merchants navigate EU tax rules, I’m breaking down exactly when to charge VAT, when not to, and how to automate the whole process.

Quick Navigation:

Not VAT registered? Read this
VAT registered? Here’s what you need to know
B2B sales & VAT exemption
How to automate VAT validation

🚨 2025 Update: New EU VAT Rules

The EU introduced new simplified VAT schemes for SMEs on January 1, 2025. If your annual EU-wide turnover is below €100,000, you might qualify for VAT exemption.

Important: Implementation varies by country, so check with your local tax authority.

Do You Even Need to Worry About VAT?

Before we dive in, let’s figure out if you’re VAT-registered.

You’re Probably NOT VAT-Registered If:

Your annual turnover is below €20,000-€100,000 (depends on your country)
You just started selling
You haven’t received VAT registration papers from your tax office

Good news: If you’re not VAT-registered, you don’t charge VAT to anyone - regardless of where they’re from. Keep it simple!

When to register: Once you hit your country’s threshold (€20,000 in Netherlands, varies by country), you legally must register.

VAT-Registered? Here’s Your Cheat Sheet

Once you’re VAT-registered, things get interesting. Whether you charge VAT depends on two things:

Where is your customer? (Same country, different EU country, or outside EU)
Who is your customer? (Consumer or business)

Here’s the quick reference table:

Customer Location	B2C (Consumers)	B2B (Businesses with VAT ID)
🏠 Same EU country	✅ Charge VAT	✅ Charge VAT
🇪🇺 Different EU country	✅ Charge VAT*	❌ No VAT (reverse charge)
🌍 Outside EU	❌ No VAT	❌ No VAT

*With some exceptions - keep reading!

Scenario 1: Customers in Your Home Country

Simple rule: Always charge VAT to everyone in your own country.

Dutch store → Dutch customer = 21% VAT
German store → German customer = 19% VAT
French store → French customer = 20% VAT

Doesn’t matter if it’s a consumer or business - same country = always charge VAT.

Why? Because this is your “home turf” where you’re registered. No exceptions here.

Scenario 2: Consumers from Other EU Countries

This is where it gets tricky. You do charge VAT, but which rate?

The €10,000 Threshold (Micro-Business Rule)

If your annual EU cross-border sales are under €10,000:

✅ Charge your home country’s VAT rate
✅ Simple - one rate for everyone
✅ No need to register in other countries

Example: You’re a Dutch store selling to French customers. Sales are €8,000/year. You charge Dutch VAT (21%) to everyone.

Over €10,000? Welcome to Destination-Based VAT

If your annual EU cross-border sales exceed €10,000:

Charge the customer’s local VAT rate
Germany = 19%, France = 20%, Italy = 22%, etc.
You’ll need to register for VAT in those countries OR use the One Stop Shop (OSS) system

Example: Same Dutch store, but now selling €50,000/year across EU. French customers pay 20% French VAT, German customers pay 19% German VAT.

Pro tip: Shopify can calculate these rates automatically once you set it up correctly. Here’s how →

Scenario 3: B2B Sales (The Reverse Charge Mechanism)

Here’s where you can save your business customers money - and yourself admin time.

The Rule: Cross-Border B2B = No VAT

When selling to a VAT-registered business in another EU country, you don’t charge VAT.

Why? The “reverse charge mechanism” - the buyer pays VAT in their own country instead.

Requirements:

✅ Customer must have a valid VAT ID (e.g., DE123456789)
✅ Customer must be in a different EU country than you
✅ You must verify the VAT ID is valid
✅ Invoice must show both VAT numbers + “Reverse charge” note

How This Looks in Practice

Wrong way:

Dutch store → German business customer
Invoice shows 21% Dutch VAT
Customer pays €121 (€100 + €21 VAT)
Customer is annoyed - they’re double-taxed!

Right way:

Dutch store → German business customer
Verify VAT ID: DE123456789 ✅
Invoice shows €100, no VAT
Note: “Reverse charge - recipient responsible for VAT”
Customer pays €100, handles VAT in Germany themselves

Automating B2B VAT Exemption

Manually checking every VAT ID is a pain. Here’s what you need:

The manual process (don’t do this):

Customer claims they’re a business
You ask for VAT ID via email
You check it on VIES database
You manually mark them tax-exempt in Shopify
You remember to do this every time
You file the certificate somewhere
Repeat for every B2B customer… 😫

The automated process (do this):

Use the EU Tax Exemption App to:

Add a VAT ID field on your cart/checkout
Auto-validate against EU VIES database in real-time
Apply tax exemption instantly if valid
Store validation records for audits
Add proper notes to invoices automatically

Installation takes 2 minutes. Free plan available. Try it here →

Scenario 4: Customers Outside the EU

Simple rule: No VAT for anyone outside the EU.

🇺🇸 US customers? No VAT
🇬🇧 UK customers? No VAT (since Brexit)
🇨🇭 Swiss customers? No VAT
🇦🇺 Australian customers? No VAT

Important: You still report these as 0% VAT sales for tax purposes. Keep proper invoices as proof of export.

Special Note: UK After Brexit

Since January 1, 2021, the UK is treated as “outside EU” with special rules:

For orders under £135:

Register for UK VAT
Charge 20% UK VAT at checkout
You handle the VAT

For orders over £135:

No VAT at checkout
Customer pays import VAT when receiving goods

Most small EU stores avoid this headache by not shipping to the UK. 🤷‍♂️

Setting Up VAT in Shopify (The Right Way)

Step 1: Configure Your Store

Settings → Taxes and Duties → European Union

Enter your VAT registration number
Enable automatic tax calculation
Set up countries where you’re registered
Configure exemptions for B2B customers

Step 2: Handle B2B Customers with the EU Tax Exemption App

Why avoid manual work?

The manual approach requires you to for every single business customer:

Open their profile in Shopify
Go to “Manage tax settings”
Select “Don’t collect tax”
Repeat this for every new B2B customer…

This is time-consuming, error-prone, and doesn’t scale as your business grows.

The automated solution (recommended):

The EU Tax Exemption App automates this entire process:

What the app does:

Real-time validation during checkout
- Adds a VAT number field to your cart
- Validates instantly via the official EU VIES database
- Shows immediately if the number is valid
Automatic tax exemption
- No more manual work needed
- VAT is automatically removed for valid numbers
- Customer sees business price immediately
Customer recognition
- Saved customers don’t need to re-enter their VAT number
- System recognizes them automatically on return
- Seamless checkout experience
Complete documentation
- All validations are automatically logged
- Export to CSV for your accounting
- Perfectly prepared for tax audits
Compliant invoices
- Automatically adds “Reverse charge” notes
- Shows both VAT numbers correctly
- Meets all EU requirements

Installation in 3 steps:

1. Install the app from Shopify App Store
2. Customize the widget to match your brand (optional)
3. Done - start validating immediately!

Benefits:

✅ Save 10+ hours per week
✅ Zero validation errors
✅ Better conversion (customers see business prices immediately)
✅ Audit-proof administration
✅ Multi-language support for all EU countries
✅ Free plan available

Install the EU Tax Exemption App →

Step 3: Generate Compliant Invoices

Your invoices need:

Your VAT number
Customer’s VAT number (for B2B)
“Reverse charge” note (for cross-border B2B)
Correct VAT rates per country
Line-item tax breakdown

Shopify’s default invoices often miss these details. Consider using invoice apps like Sufio or Order Printer Pro, or use our app which handles this automatically.

Real-World Examples

Example 1: Dutch webshop, various customers

Situation: You’re selling from the Netherlands to different customers.

Customer	Type	Country	VAT?	Rate	Why?
Jan de Vries	Consumer	🇳🇱 NL	✅ Yes	21% NL	Domestic B2C
TechCo BV (NL123456789B01)	Business	🇳🇱 NL	✅ Yes	21% NL	Domestic B2B
Marie Dubois	Consumer	🇫🇷 FR	✅ Yes	21% NL*	EU B2C under threshold
SARL Innovation (FR12345678901)	Business	🇫🇷 FR	❌ No	-	EU B2B reverse charge
John Smith	Consumer	🇺🇸 US	❌ No	-	Outside EU

*Assuming you’re under the €10,000 threshold. Otherwise 20% French VAT.

Example 2: German store grows above threshold

Year 1 - Under €10,000:

Total EU sales: €8,500
Austrian customer orders €100
You charge: €100 + €19 (German VAT) = €119
Simple!

Year 2 - Above €10,000:

Total EU sales: €45,000
Austrian customer orders €100
You charge: €100 + €20 (Austrian VAT) = €120
You need to use OSS or register in Austria

Solution: Register for OSS (One Stop Shop) via your tax authority. Report all EU sales in one return, pay VAT to your own country, they distribute it.

Example 3: B2B sale with validation

Scenario: Spanish store sells to Italian business.

Customer enters: IT12345678901

App validates:

✅ Format correct
✅ VIES database confirms validity
✅ Company name matches: “Rossi SRL”
✅ Different country than seller

Result:

VAT is automatically removed
Invoice shows: “Reverse charge - art. 194 VAT Directive”
Both VAT numbers on invoice
Validation saved for audit

If number was invalid:

❌ Validation fails
Customer sees message: “VAT number not valid”
Normal VAT is charged
Customer can correct number or proceed as consumer

Frequently Asked Questions

What if a customer claims a VAT number but it’s invalid?

You must charge VAT if the number cannot be validated. It’s your responsibility to verify. During an audit, you’re liable if you incorrectly didn’t charge VAT.

Our app handles this automatically - invalid numbers = normal VAT is charged.

Do I need to periodically revalidate VAT numbers?

Yes, best practice is to revalidate quarterly. Businesses can:

Go bankrupt
Lose their registration
Move to another country

The EU Tax Exemption App can do this automatically for you.

What about digital products and services?

Digital products follow the same rules, but with some nuances:

B2C (consumers):

Always charge VAT at customer’s location
No €10,000 threshold - from €1 already destination-based VAT
OSS is mandatory for digital services

B2B (businesses):

Reverse charge applies here too
Always validate the VAT number

Can I try the app for free?

Yes! The EU Tax Exemption App has a free plan for small stores. You can start immediately without a credit card.

Paid plans offer more validations and extra features, but the free plan is perfect to get started.

What if VIES is offline?

The VIES database sometimes goes offline for maintenance. Our app:

Automatically retries after a few minutes
Shows a clear message to the customer
Lets you set whether orders should be accepted during downtime
Still validates once VIES is back online

You can also set up that orders are accepted as “pending validation” and you validate them later before shipping.

What about Brexit and the UK?

Since January 1, 2021, the UK is no longer part of the EU for VAT purposes:

Sales from EU to UK:

Under £135: Register for UK VAT, charge 20%
Over £135: No VAT, customer pays on import

Sales from UK to EU:

Register for VAT in EU countries or use IOSS
Charge VAT per destination country

Most small webshops choose not to sell to/from the UK because of the complexity.

The Bottom Line

VAT in the EU is complex, but here’s what matters:

✅ Same country = always charge VAT
✅ EU consumers = charge VAT (rate depends on your turnover)
✅ EU businesses = no VAT (if validated VAT number)
✅ Outside EU = no VAT

Want to make B2B VAT exemption automatic?

Stop manually checking VAT IDs and marking customers tax-exempt. Let our app handle it:

✅ Real-time VAT validation ✅ Automatic tax exemption ✅ Compliant invoicing ✅ Audit-ready records ✅ 2-minute setup ✅ Free plan available

Install EU Tax Exemption for free →

Need More Help?

Last updated: January 2025. VAT rules change - always verify with your tax advisor for your specific situation.

The Complete VAT Guide for EU Shopify Stores (2025)