Understanding the Reverse Charge Exemption
The reverse charge exemption allows businesses to fully exempt VAT on orders originating in the European Union (EU) and shipped to a B2B customer in a different EU country or the United Kingdom (UK). This change is particularly relevant for merchants handling cross-border sales.
What’s New?
- VAT exemption is now applicable to orders shipped from the EU to the UK when the buyer’s location has the Reverse Charge (EU/UK) exemption applied.
- Reverse charge details will now appear on VAT invoices for merchants using Shopify Tax who have opted in.
Steps to Take for Merchants
Ensure that your default location is set correctly in the Shopify admin. If your default location is outside the EU, the reverse charge exemption may not be applied correctly.
How to Apply the Reverse Charge Exemption
For Shopify Plus Merchants:
- Navigate to Companies in your Shopify admin.
- Select the company where you want to apply the exemption.
- Choose the specific company location and tap the three dots in the Customer card.
- Click on Edit tax details.
- Change the tax settings to “Collect tax unless exemptions apply.”
- Find and check the box next to Reverse Charge (EU/UK).
- Press Save to finalize the changes.
For All Other Merchants:
- Go to Customers in your admin dashboard.
- Select the customer for whom you want to apply the exemption.
- Tap the three dots in the Customer card and select Edit tax details.
- Adjust the tax settings to “Collect tax unless exemptions apply.”
- Locate and check the box for Reverse Charge (EU/UK).
- Click Save to confirm the update.
If your company or customers already have the exemption applied, no further action is required.