Shopify Tax features for the European Union and United Kingdom

If your store sells to customers in the European Union (EU) or the United Kingdom (UK), then you can use Shopify Tax to improve VAT calculation accuracy and generate compliant VAT invoices.

VAT invoices

If your store sells to customers in the European Union or the United Kingdom, then you can generate VAT invoices in the Shopify admin that attach to an order confirmation page to help you remain compliant with international tax requirements. As part of the early access program, improvements have been implemented to VAT calculations to improve accuracy.

VAT invoice eligibility requirements

To be eligible for VAT invoices, the following conditions must be true of an order:

• Duties were not calculated and charged for the order.
• The order is being shipped to a destination in the European Union or the United Kingdom.

Before you generate VAT invoices, ensure that your VAT registrations are complete and up to date.

Activate automatic VAT invoices

You can automatically generate and send VAT invoices from your Shopify admin in your Taxes and duties settings.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. Select European Union or United Kingdom.

3. In the VAT Invoices section, select Generate and Send invoices when orders are placed.

4. Optional: Select a custom logo to include on your invoices. The logo applies to all VAT invoices regardless of region. Refer to Managing Brand Assets for logo requirements.

Resend VAT invoices to customers

If a customer requests another copy of their VAT invoice, then you can resend it from the order details.

Steps:

1. From your Shopify admin, go to Orders.

2. Click the order that you want to resend a VAT invoice for.

3. In the Timeline or VAT invoice section, tap the applicable VAT invoice that was previously sent to the customer.

4. In the PDF preview of the VAT invoice, download the PDF and then email it to the customer.

Customer experience for VAT invoices

After you generate a VAT invoice, or it's automatically generated, it displays in the VAT Invoice section of a customer's order confirmation page. If you make changes to an order that require a new VAT invoice, then a new invoice populates in the VAT Invoice section. A customer can save or print a copy of their VAT invoice from a PDF on a desktop device, or by using the Share icon on a mobile device.

Product categories for VAT

If your store sells to customers in the European Union or the United Kingdom, then you can use product categories to improve the accuracy of your VAT rates.

Product categories are labels that are assigned to products or to collections of products. Product categories are used to indicate the tax obligations and exemptions that apply to a purchase. Product categories are selected from Shopify's Standard Product Taxonomy, which is a predefined and standardized list.

Product categories are also useful for managing your products, and can be used for the following tasks:

• filtering your product list
• creating collections
• selling on channels that require a standardized product type, such as Facebook
• adding category metafields that can be connected to your variants

When you create a product and enter a name, description, and add images for the product, this information is used to automatically generate a product category suggestion. This category is only a suggestion, and shouldn't be considered tax advice.

How product categories affect VAT rates

Product categories are used to automatically determine the applicable VAT rate based on the product type and destination country. Many European Union countries apply reduced VAT rates to specific product types, such as food, books, or children's clothing.

The following table displays examples of common product types and their typical VAT treatment in the EU:

Setting up and managing product categories

On the Product categories page, a notification displays if you have products that don't have product categories applied to them, or if you have suggestions for product categories that need to be reviewed. Products in need of review display in either of the following tabs:

• The Pending review tab displays products that have suggested product categories. Product categories that are suggested in this tab don't apply unless you accept them.
• The Pending selection tab displays products that don't have suggestions, and must be manually selected.

Find products that need categorization

You can access uncategorized products directly from your tax settings.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. In the Regional settings section, click European Union or United Kingdom.

3. In the Tax rate management section, click Uncategorized products.

4. Review the products in the Pending review and Pending selection tabs.

Select or approve a product category individually

You can add or update a product category for any product at any time from your product settings or from the tax settings.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. In the Regional settings section, click European Union or United Kingdom.

3. In the Tax rate management section, click Uncategorized products.

4. On the Product categories page, find the product to select or approve.

5. Do one of the following actions:

   • If a suggested product category is provided, then approve the suggestion:
     1. Click the check mark in the Product category box.
     2. Click Save.
   • If a category is not provided, or needs correction, then search for and select a product category:
     1. Click the x in the Product category box.
     2. In the Product category box, start typing a description of the product.
     3. Click the product category when the correct suggestion is offered.
     4. Click Save.

You can also set product categories directly from the Products page. Learn more about selecting or updating a product category individually.

Select or approve product categories in bulk

If you have many products that need categorization, you can update them in bulk from the tax settings or by using the bulk editor.

Steps:

1. From your Shopify admin, go to Settings > Taxes and duties.

2. In the Regional settings section, click European Union or United Kingdom.

3. In the Tax rate management section, click Uncategorized products.

4. On the Product categories page, click the checkbox next to all products that you want to select or approve.

5. Do one of the following actions:

   • If suggestions are provided, then approve the suggested product category for all selected products:
     1. Above the product list, click Accept and save.
     2. Click Accept and save all.
   • If suggestions are provided but need to be adjusted, then search for and select a product category for selected products:
     1. In the Product category box of the item that needs adjustment, start typing a description of the product.
     2. Click the product category when the correct suggestion is offered.
     3. Click Save.
   • If suggestions aren't provided, then search for and select a product category for all selected products:
     1. Above the product list, click Choose category.
     2. In the Choose category box, start typing a description of the product.
     3. Click the product category when the correct suggestion is offered.
     4. Click Accept and save all.

Learn more about selecting or updating product categories in bulk using the bulk editor.

Select a product category by using a CSV file

If you have a large catalog, you can import product categories using a CSV file.

You can import product categories using a CSV product import. To verify that your product category values match Shopify's predefined list, refer to Shopify's Standard Product Taxonomy.

You can download and view a sample product CSV file to use as a template.

Tax calculation by using product categories

After you categorize your products, the categories are used to automatically determine your tax obligations when selling into a particular region. Using product categories increases the accuracy of tax calculations, and reduces the need for tax overrides.

If you set a product category for a product that has an override in place, then the override takes precedence over product category tax calculations. This includes collection-based tax overrides.

Consider removing any product tax overrides that conflict with your product categories. However, if you're aware of tax rules that aren't calculated by product categories, then keep your product tax overrides.

You're not required to use product categories. If you choose not to apply product categories to your products, then you need to use tax overrides and manually update them.

Limitations

There are some situations in which product categories can't be used to calculate taxes:

• Industry-specific or product-specific taxes that result in a separate tax line item, such as e-waste fees.
• Taxes that are based on volume, weight, ingredients, or size, such as excise taxes.
• Variants of a single product can't have different product categories.
• Bundled goods that are created as a single product have a single product category.
• Product categories don't sync between Shopify and marketplaces, such as Meta or Google.
• Products and categories with tax overrides.
• Product categories aren't applied to orders that don't qualify for Shopify Tax, which include the following types of orders:
  • Third-party app and API-generated orders, such as Buy Button, Facebook and Amazon orders.
  • Orders that contain one or more products with an associated product or shipping rate tax override.
• Resort Tax is not automatically included in Shopify Tax's calculations. If you need to add Resort Tax to your transactions, then you need to use Manual Tax.

Regional VAT rate variations

Some European Union countries have regions with different VAT rates that Shopify Tax might not fully support. Review the following known regional considerations:

• Spain: The Canary Islands, Ceuta, and Melilla have different tax rules than mainland Spain. Ceuta and Melilla are recognized as tax-free, but the Canary Islands might charge standard Spain VAT rates instead of the applicable local rates.
• Portugal: Madeira and Azores have reduced VAT rates compared to mainland Portugal. These rates are recognized by Shopify Tax.
• Germany: Heligoland has different tax rules that aren't automatically calculated.
• Austria: Some regions have specific VAT rules that might not be fully supported.

If you sell to customers in regions with special tax rates, then consult with a tax professional to confirm that you're charging the correct rates.

Validate tax calculations by using draft orders

Before processing live orders, you can verify that your tax settings are calculating correctly by creating a draft order. This allows you to test tax calculations without affecting real transactions.

Steps:

1. Create a draft order with the product you want to test.
2. Add a customer address in the destination country or region.
3. Review the tax breakdown in the order summary.
4. Compare the calculated rate against expected rates for your product category.
5. If the rate is incorrect, then review your product category and any tax overrides that might be affecting the calculation.

Troubleshooting VAT and product category issues

If you're experiencing issues with VAT calculations or product categories, then review the following common issues and solutions.

Frequently asked questions

Shopify Tax European Union and United Kingdom pricing

For complete information on Shopify Tax pricing, refer to the pricing overview page for all regions.

Prepare to contact Shopify Support about Shopify Tax in the EU and UK

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
• An admin link to an order showing the issue (go to Orders, click the order, and copy the URL from your browser)
• If possible, an admin link to an order where VAT calculated correctly for comparison
• Your VAT registration number(s) and registration type (OSS, IOSS, Non-Union OSS, or country-specific)
• The customer's shipping address (country and postal code)
• The product category assigned to the affected product(s)
• Whether the order was for physical goods, digital goods, or both
• The fulfillment location for the order
• When the issue started occurring
• Steps you've already tried from the troubleshooting section

Related resources

• Product categories
• Tax overrides and exemptions
• Setting up taxes
• Duties and import taxes
• Shopify Tax considerations