How Shopify Merchants Handle VAT in the EU

Shopify is one of the most widely used platforms for dropshippers. However, many entrepreneurs struggle with setting up VAT correctly. A mistake here can lead to fines, double taxation, or customer dissatisfaction.

How Shopify Manages VAT
Shopify allows merchants to:

  • Set tax rates for each EU country.

  • Enable OSS/IOSS integration for EU-wide compliance.

  • Mark products as subject to VAT or VAT-exempt.

The Problem
By default, Shopify assumes the seller is responsible for collecting VAT in the customer’s country. This leads to issues when the goods are shipped directly from outside the EU, where VAT should not be charged by the seller at all.

Example:

  • A Dutch Shopify store selling €100 phone cases from China.

  • If configured incorrectly, Shopify charges Dutch 21% VAT.

  • In reality, VAT should be collected at import by customs.

Best Practice

  • For goods shipped from within the EU → enable OSS and set VAT rates accordingly.

  • For goods shipped from outside the EU → disable VAT collection and clearly indicate that VAT/import duties will be handled at delivery (unless using IOSS).

Legal Source:

Conclusion
Shopify can handle VAT well, but only if properly configured. Sellers must adapt their settings depending on whether they ship from within or outside the EU.

Need help configuring Shopify VAT? Ecom VAT Experts provides hands-on support to keep your store compliant and customer-friendly.

Back to blog