Do you pay VAT on Shopify fees?

Accounting for VAT with an e-commerce business is a minefield of rules on fees, international transactions and other areas. But completing your returns needn’t be stressful. In this article we’ll walk you through VAT on Shopify fees; information all e-commerce business owners need to know.

Bricks and mortar retail stores had it easy in terms of VAT, but the digital age is in full swing, which means VAT needs to be accounted for in whole new way. With new Brexit laws coming into play VAT for UK and EU e-commerce businesses has changed across the board.

We’ve already shown you how to account for your product samples and gifts and today we’re going to zone in on the aforementioned frequently asked question on VAT treatment for Shopify Fees to make things simple for your e-commerce business

What is Shopify and how does it work?

Shopify is a well-known complete commerce platform that has been designed to allow its users to: “start, grow, and manage a business.”

Using Shopify, you can:

• Create and customize your very online store
• Sell in multiple places, including web, mobile, social media and online marketplaces to name a few
• Manage products from one place
• Manage inventory, payments, and shipping

Shopify is also completely cloud-based and hosted, meaning you won’t have to worry about the added time and expense that comes hand in hand with upgrading or maintaining your business software. Oh and because the world of business never sleeps, Shopify’s flexibility means that you can manage your business from anywhere in the world.

How much does Shopify cost?

Users are able to try out Shopify free for 3 days. However, after this trial period, you will then have to choose a price plan that suits your business requirements, whether you’re  a start-up or an established business.

And when choosing a price plan that suits your business needs, there’s a number of key considerations that you should take into account including the following:

• Transaction Fees: In addition to the monthly subscription fee, you will also need to pay transaction fees on each sale, which will vary depending on your chosen payment processor.  
• Third-Party Apps: Many Shopify users utilise third-party apps to enhance their store’s functionality, which also come with additional costs.  
• Themes: While Shopify offers free themes, there’s also the option to purchase premium themes in order to achieve a more customised design – these also come at an additional cost.

What are the benefits of Shopify?

If you are considering using Shopify for the first time, you will be pleased to hear that there are a whole host of benefits that come hand in hand with the platform, especially if you are looking to optimise your reach in the digital world.

Shopify offers numerous benefits for businesses of all shapes and sizes including the following:

User-friendly interface: Shopify is well known for its intuitive interface, making it incredibly easy for users to get to grips with, even those that have little technical experience.

Customisable: Shopify can also be easily customised,  requiring minimal coding knowledge.

Grows with your business: Shopify offers a range of plans to accommodate businesses of all different shapes and sizes, from small startups right through to large enterprises, meaning the platform can grow with you, no matter where you are in your business journey.

Equipped to handle increased traffic and sales: Shopify is also perfectly equipped to  handle increased traffic and meet product demand, as your business grows.

Built-in features:  Another advantage of Shopify is that it comes complete with a wide range of built-in features, including order fulfilment, payment processing, product management, inventory tracking, , and access to a number of different marketing tools.

Access thousands of third-party apps: Access to third party apps mean that it is incredibly easy to extend the functionality of your store.

Built-in marketing tools: Take advantage of all of Shopify’s built-in marketing features such as email marketing, social media integration, and abandoned cart recovery. These are a great way to increase sales.

A secure platform: Shopify utilises robust security measures to protect your store and customer data.

Responsive design: All Shopify stores are automatically mobile-responsive, ensuring a seamless shopping experience across all devices.

24/7 customer support: Shopify provides 24/7 customer support through various channels, including email and phone.

Ultimately, Shopify provides a powerful, efficient and user-friendly platform for businesses to establish their craft or service and grow their online presence, at a pace that works for them.

VAT on Shopify Fees for the UK

There is no VAT on UK Shopify fees, but it is accounted for as a 20% reverse charge.

While that information is surprisingly hard to come by, Shopify confirms that taxes on their fees are only taken in Canada (where they are registered). If your business is registered in the UK, there is no VAT to be paid on Shopify fees and it has a 20% reverse charge tax treatment.

For this information to apply, if you are an e-commerce business in the UK, make sure you have provided your VAT number to Shopify to ensure they do charge VAT on their fees.

Due to Brexit, Shopify heavily advises UK merchants, EU merchants to check the changes that may have implications for aspects of your business. New Brexit laws have come into effect for both EU and non-EU merchants who sell to UK customers and UK merchants that trade outside of it.

The United States (US)

Taxes on Shopify fees vary in the US, with particular states and jurisdictions being taxed, while others are tax-free. You can find the full list of US jurisdictions here.

With this in mind, it’s important to know where and when you may need to collect sales tax, and most importantly, how to collect it accurately based on product-and location-specific rates.

Australia

If your e-commerce store is registered in Australia, your business will be charged a 10% Goods & Services tax or GST.

All orders within Australia are GST-taxable however, there are few exceptions including some educational materials, medical aids and appliances. You should also keep in mind that sales outside of Australia are also taxable, unless the goods or services are exported within 60 days from payment.

Ireland

While not on the initial list of taxed countries, an amendment in June 2019 means that if your store is registered in Ireland, then you’re charged 23% VAT on relevant Shopify fees.

Under Brexit, Northern Ireland has adopted a dual status which means it is considered part of both the EU and UK tax regimes so it is important to remember this.

VAT Registration and Shopify

While there may be no VAT on Shopify fees, it is important to indicate on your Shopify account if you are registered for VAT, so your transactions will be correctly accounted for. If you’re not sure if you should be registered for VAT then make sure to keep an eye on your expected turnover and add your VAT details to Shopify and other relevant apps when you do register for VAT.

If you are worried about passing the VAT threshold, you may want to consider registering for VAT before your company is obliged to do so. This can help reduce stress and worry and prepare your business for future growth.