Switching to Basic Tax
If you're already using Shopify, then you can update your tax settings to reflect your tax registrations. This change doesn't affect how tax is charged on your products.
When you update your tax settings, you're asked to provide a tax number. After the tax number is added, tax rates in the regions where you've registered are updated automatically.
Shopify Support can help you update your tax settings in your Shopify admin, but can't provide legal tax advice. If you need help changing your tax settings, then contact Shopify Support. If you need help understanding your tax obligations, then contact local tax authorities or a tax professional.
On this page
- Understanding tax numbers
- Determine if you need to register for a tax number
- Register for a VAT number
- Add your IOSS number for selling to the European Union
- Troubleshooting tax registration issues
- Verify your tax settings with a test order
- Override taxes
- Brexit implications for UK sales
- Selling to the European Union from outside the European Union
- Frequently asked questions
- Prepare to contact Shopify Support about tax registration issues
- Resources
Understanding tax numbers
A tax number is an identifying code that allows you to collect tax on your product sales. Your tax number is issued to you by your local tax authority. Depending on which region you are in, the tax number might be called a VAT number, a sales tax ID, or simply a tax number. If you're not sure, then refer to a local tax expert.
VAT number formats by country
If you sell to customers in the European Union, then your VAT number must follow a specific format. The format varies by country and typically includes a country code prefix followed by numbers or a combination of numbers and letters. EU VAT numbers can be validated through the VAT Information Exchange System (VIES), a tool provided by the European Commission.
| Country | Format example |
|---|---|
| Germany | DE123456789 (DE + 9 digits) |
| France | FRXX123456789 (FR + 2 characters + 9 digits) |
| Netherlands | NL123456789B01 (NL + 9 digits + B + 2-digit index) |
| United Kingdom | GB123456789 (GB + 9 digits) |
Determine if you need to register for a tax number
Whether you need to register for a tax number and charge taxes depends on your sales volume, business location, and where your customers are located.
Sales threshold requirements
Typically, you're required to register to charge taxes if your sales exceed a certain threshold. The threshold varies by region:
- European Union: If your combined sales to all other EU member countries are equal to or greater than €10,000 EUR in total, then you must charge the VAT rate in your customer's location.
- United Kingdom: Different rules apply for orders above and below £135 GBP. Learn more about UK tax requirements.
Refer to your local tax authority to find out what the requirements are in your region. You can find links to tax authorities in the EU tax reference.
Register for a VAT number
If you intend to sell to countries in the EU or UK, then you might need to register with tax authorities in those regions. The process varies depending on where your business is based and where you sell, and on individual government requirements. It's your responsibility to determine where you need to register to charge VAT.
If you have a significant presence in a country, then you should contact that country's tax authority to confirm whether you need to register to collect taxes.
Register to charge taxes in an EU country
If you need to register to charge taxes in an EU country or in the UK, then you can contact that country's tax authorities. For links to EU member country tax authorities, refer to EU tax reference.
After you've registered, add your VAT number on the Taxes and duties page.
Add your IOSS number for selling to the European Union
If you're located outside the European Union and sell to customers within the European Union, then you can use the Import One-Stop Shop (IOSS) scheme. The IOSS allows you to collect VAT at checkout on orders equal to or less than €150 EUR, so your customers don't pay taxes upon delivery.
Before you add your IOSS number to your tax registration, make sure that you've set up a shipping profile for the European Union.
Steps:
From your Shopify admin, go to Settings > Taxes and duties.
In the Tax regions section, beside European Union, click Manage.
In the Shipping to the EU section, next to VAT on sales to the EU, click Collect VAT.
From Registration country, select the country where you registered for IOSS.
In IOSS VAT number, type your IOSS number.
Click Collect VAT.
Learn more about the IOSS at ec.europa.eu.
Troubleshooting tax registration issues
If you're experiencing issues when setting up or updating your tax registrations, then review the following common problems and solutions.
Troubleshoot tax registration isn't saving
If your tax registration isn't saving, then check the following possible causes:
VAT number format is incorrect
- Compare your VAT number against the required format for your country.
- Ensure your VAT number includes the correct country prefix and follows the exact format required.
Extra spaces in the VAT number
- Check for spaces at the beginning or end of your VAT number.
- Remove any extra spaces and re-enter your VAT number.
No shipping zone for the country
- Go to Settings > Shipping and delivery and verify the country has a shipping zone.
- Create a shipping zone for the country, then return to tax settings.
Troubleshoot taxes aren't being charged on orders
If taxes aren't being charged on orders, then check the following possible causes:
Tax registration not added for the region
- Go to Settings > Taxes and duties and check if the region displays a registration.
- Add a tax registration for the region where you want to collect taxes.
Product isn't set to charge tax
- Open the product page and check if Charge tax on this product is activated in the Pricing section.
- Activate the Charge tax on this product option for the product.
Customer is marked as tax-exempt
- Open the customer profile and check the Tax exemptions section.
- Remove the tax exemption if it was added incorrectly.
Order value exceeds threshold (IOSS)
- Check if the order subtotal exceeds €150 EUR for EU orders.
- For orders over €150 EUR, VAT and duties are collected by the shipping carrier upon delivery, not at checkout.
Troubleshoot tax amounts are different after updating settings
If tax amounts are different after updating your settings, then check the following possible causes:
Tax rounding method changed
- Compare recent orders to orders placed before the update.
- This is expected. Basic Tax rounds taxes at the line-item level instead of the invoice level. Learn more about tax rounding.
Tax overrides weren't carried over
- Go to Settings > Taxes and duties and check the Tax overrides section.
- Recreate any tax overrides that were previously set up. Learn more about tax overrides.
Verify your tax settings with a test order
After updating your tax registrations, create a draft order to verify that taxes are calculated correctly before accepting live orders.
Steps:
From your Shopify admin, go to Orders > Drafts.
Click Create order.
Add a product to the order.
In the Customer section, add a test customer with an address in the region where you want to verify taxes.
Review the Taxes section to confirm the correct tax rate displays.
If the tax calculation is correct, then you can delete the draft order. If the tax isn't correct, then review your tax registration settings.
Override taxes
If you need to charge different tax rates for specific products or regions, then you can create tax overrides. This is useful for products that are tax-exempt or have reduced rates in certain locations.
For more information about how tax overrides are affected when you update, refer to Manage your taxes.
Brexit implications for UK sales
If you sell to customers in the United Kingdom, then VAT requirements differ based on whether the order value is above or below £135 GBP. You might also need a UK EORI number.
For complete details about UK VAT requirements, thresholds, EORI numbers, and how to handle VAT and duties, refer to UK taxes reference.
Selling to the European Union from outside the European Union
When you ship orders to customers in EU member countries from outside the European Union, import and duty rules apply based on order value. Orders equal to or less than €150 EUR are subject to VAT, while orders greater than €150 EUR are subject to import VAT and duties collected upon delivery.
If you want to collect VAT at checkout, then you can register for the Import One-Stop Shop scheme (IOSS).
For complete details about EU VAT requirements, IOSS registration, thresholds, and how to collect VAT at checkout, refer to EU taxes reference.
Frequently asked questions
When should I contact a tax professional or Shopify Support?
Contact a tax professional for questions about:
- Whether you need to register for taxes in a specific region
- Tax obligations for your specific business type
- How to file and remit taxes correctly
- Interpreting tax laws and regulations
Contact Shopify Support for questions about:
- How to change settings in your Shopify admin
- Technical issues with tax calculations in your store
- Understanding Shopify features and how they work
Why can't I add a tax registration for a specific country?
You need to create a shipping zone for a country before you can add a tax registration for it. Tax regions only appear after a shipping zone exists for that country. Set up shipping zones for the countries where you want to collect taxes.
Will I be able to override tax settings?
Yes. You can create tax overrides for products that need different tax rates than the default. For more information, refer to Override taxes and Tax overrides and exemptions.
Why are the tax amounts different than before on customer orders?
After you update your tax settings to use Basic Tax, you might notice small variances in total tax amounts. This variance occurs because tax amounts are rounded at the line-item level, rather than at the invoice level. You can learn more about rounding calculations in Manage your taxes.
Prepare to contact Shopify Support about tax registration issues
Before reaching out to Shopify Support, gather the following information to help resolve your issue faster:
- A description of what you expect to happen and what's happening instead
- Your tax registration number(s) (VAT number, sales tax ID, or other tax identifier)
- The country or region where you're trying to add or update a registration
- Whether you have a shipping zone set up for the country
- If applicable, an admin link to an order showing a tax calculation issue (go to Orders, click the order, and copy the URL)
- If possible, an admin link to an order where taxes calculated correctly for comparison
- When the issue started occurring
- Steps you've already tried from the troubleshooting section
Resources
- EU tax reference - VAT rates and tax authority links
- UK tax reference - UK-specific tax information
- Tax overrides and exemptions - Set up custom tax rates
- Manage your taxes - Update registrations and settings
- European Commission VAT information - Official EU VAT rules