VAT and customs duties on the Shopify platform: How to settle purchases from the Matterhorn wholesale?

Introduction

Wholesale purchases are not only about cost optimization but also about the obligation to correctly settle taxes. In the case of the Shopify platform and purchases from the Matterhorn wholesale, a key issue is the calculation of VAT and any customs duties depending on the shipping location of the order. In this article, we will discuss what taxes may be incurred, what procedures apply to entrepreneurs from the European Union with a valid EU VAT number, and how the VAT OSS procedure works.

Before you start selling and calculating your margins, you must remember that products purchased from wholesalers in a dropshipping model are NET prices, and their final price will vary depending on the country to which the goods ultimately go. Your customer is the VAT payer, and you must charge them this tax. Shopify has built-in mechanisms that facilitate tax calculation for individual customers from EU countries. If you have a store on another system, you need to check whether it has built-in mechanisms for this purpose. 

1. What VAT will Matterhorn issue to my company?

The Matterhorn wholesale is based in Poland, which means it is subject to EU tax regulations regarding VAT. Depending on where the order is shipped, different VAT calculation rules apply:

a) Purchases by a company from Poland

If your company is based in Poland, the Matterhorn wholesale will charge the standard Polish VAT rate (23%) to your order. This tax is added to the invoice and must be settled according to local regulations.

b) Purchases by an EU company with a valid EU VAT number

If your company is registered in another EU country and has a valid EU VAT number, purchases from the Matterhorn wholesale can be settled under the reverse charge procedure. This means that:

• The Matterhorn wholesale will issue an invoice without VAT.

• The obligation to settle VAT transfers to the buyer (i.e., your company), according to the VAT rate applicable in your country.

To use this option, the EU VAT number must be verified in the VIES system (https://ec.europa.eu/taxation_customs/vies/).

Important! An invoice with 0% VAT does not mean you can sell goods without charging tax. You must settle VAT according to the regulations in your country, applying the appropriate tax rate for end customers.

c) Purchases by an EU company without an active VAT number or a company outside the EU with delivery to the EU

If your company is located in the European Union but does not have an active EU VAT number, Matterhorn will add VAT to the invoice according to the rate of the destination country, not the Polish rate of 23%. This is due to EU regulations regarding B2C sales, which impose the obligation to apply the VAT of the country to which the goods are delivered.

If your company is located outside the EU but the order is to be shipped to an EU country, Matterhorn will also charge VAT according to the rate of the destination country. In this case, the rule is that VAT is charged according to the place of delivery of the goods.

Additionally, even if you are a company outside the EU, if you sell goods to customers in the EU, you must register for VAT OSS.

How to register for VAT OSS?

1. Select the EU country in which you want to register (usually it is the first country to which you send goods).

2. Apply for registration in the VAT OSS system on the website of your local tax office.

3. Once registered, you must submit a VAT OSS declaration quarterly, reporting sales to customers in various EU countries.

4. Then you pay VAT according to the rates of individual EU countries without the need to register separately in each country.

2. How to charge VAT from buyers in the Shopify store depending on the destination country

If you are selling on Shopify and shipping goods to customers in different EU countries, the VAT OSS (One Stop Shop) procedure applies to you. Here’s how it works:

1. Sales to customers in the EU:

   • If your sales to individual customers in other EU countries exceed the threshold of 10,000 EUR per year, you must register for VAT OSS.

   • Shopify allows for automatic VAT calculation depending on the delivery country.

2. Registration for VAT OSS:

   • Companies can register for VAT OSS in their country of residence.

   • The VAT charged according to the recipient's country rate must be reported in the VAT OSS declaration quarterly.

3. Benefits of VAT OSS:

   • You can settle VAT for all EU countries in one place instead of registering separately in each state.

   • Shopify allows you to assign the appropriate VAT rates in the admin panel.

4. Sales to customers outside the EU:

   • If you sell goods to customers outside the EU, VAT is not charged on the sale, but the buyer may be subject to customs duties and import tax in their country.

   • It is advisable to inform customers about potential additional customs charges before purchase.

   • Shopify allows you to set up sales outside the EU as "export" without charging VAT.

3. Customs duties and other fees

Customs duties are charged when shipping goods outside the EU. Shopify does not support automatic customs duty calculation, so it is important to:

• Check the customs tariffs for the specific import country.

• Inform customers about possible additional charges upon package receipt.

• Establish options with carriers such as DDP (Delivered Duty Paid) or DDU (Delivered Duty Unpaid).

4. How to properly configure VAT in Shopify?

To ensure correct tax calculation on the Shopify platform:

1. Go to tax settings in Shopify.

2. Add the countries you sell to and assign the appropriate VAT rates.

3. Enable VAT OSS if this procedure applies to you.

4. Set up reverse charge for B2B transactions to avoid charging VAT for companies with an EU VAT number.

5. Integrate Shopify with accounting tools to facilitate VAT reporting.

You can find VAT settings in the "Tax and duties" section in your Shopify settings - find "Europe Union" on the list and go to edit.

Select the country where you registered for VAT OSS and enter your VAT number.

You can find the registration process for the VAT OSS service on the site https://vat-one-stop-shop.ec.europa.eu/one-stop-shop/register-oss_en 

Summary

VAT and customs duties are key aspects of selling on Shopify and purchasing from the Matterhorn wholesale. Depending on the location of your company and your customers, different rules apply, including the necessity to register for VAT OSS for companies outside the EU selling to customers in the EU.

Lack of knowledge on this topic is a trap for those who want to start selling online - if you have doubts, ask your accountant what scenario is appropriate for your store.