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

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.

• 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

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.

• 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 country → EU VAT Rates

1. EU-based Shopify Merchants

• Must register for VAT in their home country before selling.
• Must charge VAT based on the customer’s location.

2. 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.

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.

•  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.

1. 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.

2.List of OSS registration links by country → EU VAT OSS Registration

1. Go to Shopify Admin → Settings → Taxes and Duties
2. Select “Set up VAT”
3. Add your VAT registration numbers

•  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.

•  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.

 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.

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.

•  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