Last updated on 5th October 2023 at 14:02 by Alex Nicholas
As a Shopify e-commerce business owner, it's important to understand how VAT applies to your Shopify fees. VAT or Value Added Tax is a tax that is added to the price of goods and services. The rules for VAT can be complicated, particularly when it comes to online transactions and international trade. In this short article, we will explore VAT on Shopify fees and provide you with the information you need to ensure your business is compliant.
What is Shopify?
In case you were wondering, Shopify is an e-commerce platform that allows businesses to create an online store and sell their products or services in the same way that WordPress and Woccomerce and Magento do.
Shopify offers a range of pricing plans to suit different businesses, with each plan having its own set of features and fees. The fees charged by Shopify include transaction fees, credit card fees, and subscription fees. Shopify also offers its own payment gateway called Shopify Payments, which has its own set of fees.
VAT for Shopify stores in the UK
In the UK, there is no VAT charged on Shopify fees, because they are subject to a 20% reverse charge. Shopify has confirmed that taxes on their fees are only taken in Canada, which is where Shopify is registered.
However, if your business is registered for VAT, it's important to make sure that your Shopify account is set up correctly to account for VAT on your fees. The rules for VAT on Shopify fees vary depending on your location and the type of fees you are paying.
If you are unsure whether you should be registered for VAT, it's important to keep an eye on your expected turnover and add your VAT details to Shopify and other relevant apps when you do register.
Shopify taxes in other countries
In the US, taxes on Shopify fees vary depending on the state and jurisdiction. Some states and jurisdictions are taxed, while others are not taxed. You can find a full list of US jurisdictions on the Shopify website.
If your business is registered in Australia, you will be charged a 10% Goods & Services Tax or GST on your Shopify fees.
In Ireland, a change in June 2019 means that if your store is registered in Ireland, then you will be charged 23% VAT on relevant Shopify fees.
Adding VAT to products in your Shopify store
It's also important to make sure that your Shopify account is set up correctly to account for VAT on your fees. This can be done by entering your VAT number in the tax settings section of your Shopify admin. You can also set up VAT invoices for your customers in the billing section of your Shopify account.
If you use a third-party payment gateway to process payments on your Shopify store, it's important to make sure that the payment gateway is PCI compliant. PCI or Payment Card Industry compliance is a set of security standards designed to ensure that all companies that accept, process, store or transmit credit card information maintain a secure environment.
If you are using a third-party payment provider, such as PayPal or Stripe, you may also be subject to additional fees, such as transaction fees or third-party transaction fees.
Choosing your Shopify plan
Shopify offers a range of pricing plans to suit different businesses, from the basic Shopify plan to the advanced Shopify plan, all of which are subject to the rules outlined above.
Each plan has its own set of features and fees, including transaction fees, credit card rates, and subscription fees. The basic Shopify plan is the most affordable option and includes everything you need to get started with your online store, while the advanced Shopify plan offers more advanced features such as cart recovery and advanced report builder.
If you are considering signing up for a Shopify plan, it's important to compare the different pricing plans, features and Shopify themes to find the one that best suits your business needs.
Be aware of taxes when shipping out of the UK
In addition to Shopify fees and VAT, there are other taxes that may apply to your e-commerce business, depending on your location and the type of products or services you sell. For example, if you sell goods or services in the EU, you may be subject to EU VAT or if you sell in so you need to make sure that you take advice from your accountant.