VAT Number Validation for EU and UK Merchants
Shopify merchants using Shopify Tax in the European Union or United Kingdom can now enable VAT number validation at checkout. This feature streamlines compliance by automatically applying the reverse charge exemption on eligible orders. The rollout will continue over the next few weeks to cover more merchants.
Who Can Benefit?
This update is ideal for merchants using Shopify Tax with at least one fulfillment location in the EU. Reverse charge exemption is determined by the fulfillment location country rather than the store address.
How to Enable VAT Number Validation
- Navigate to your checkout settings.
- Set the Company VAT number field to Optional if you sell to B2B customers in the EU or UK.
Understanding the Reverse Charge Exemption
When applicable, VAT is automatically excluded at checkout, and the customer becomes responsible for reporting and paying it on their tax return. The exemption applies to:
- EU → EU shipments where the destination country differs from the fulfillment location country.
- EU → UK shipments.
The exemption does not apply to:
- UK → EU shipments.
- UK → UK shipments.
For example, if your fulfillment is based in France and you ship to a customer in Ireland with a valid VAT number, the reverse charge exemption applies.
Validation and Customer Data
VAT numbers entered during checkout are automatically validated and stored in the customer's profile for future orders. This ensures seamless processes for repeat purchases.
Enabling VAT Invoices
Consider enabling VAT invoices along with the Company VAT number field to send customers accurate documentation. When the exemption is applied, invoices will include:
- Reverse Charge Mechanism: Recipient responsible for VAT.
Fraud Prevention Measures
While VAT number validation confirms formatting and validity, it doesn't verify customer authorization. Suspect fraudulent use? Independently validate through the EU's VIES VAT number validation service. Additionally, Shopify may enforce rate limits for repeated validation attempts to safeguard merchants.
Considerations for Multiple Fulfillment Locations
If your store uses multiple fulfillment locations, note that the reverse charge eligibility depends on the country of the fulfillment location. Adjust your fulfillment settings accordingly to ensure compliance.