Set up German taxes in your Shopify store

The most important distinction when it comes to charging VAT in your online store is whether your business is VAT registered or not. This topic is explained in more detail in our Shopify VAT guide for selling to EU customers.

If your business is VAT registered and you want to sell to both consumers (B2C) and businesses (B2B) in different EU countries, you will need to set up your tax settings and tax rates properly.

• Tax settings
• Tax rates in Germany and the EU
  • Selling physical goods to customers in Germany
  • Selling physical goods to customers in other EU countries
    • Selling within the “micro-business” threshold
    • Surpassing the “micro-business” threshold
    • Country-specific registration
  • Selling digital goods

To charge VAT to some customers and not to others, you may choose from two possible settings, based on how you want product prices to be displayed in your Shopify store.

When selling largely to consumers (B2C), or if your country's legislation requires that you do so, you may choose to display product prices as including VAT.

To display your product prices including VAT, but still allow your business customers to have VAT deducted at checkout:

1. In your Shopify admin, go to the Settings → Taxes and duties page.
2. In the Tax calculations section, check the All prices include tax checkbox and Save your changes.

1. Go to the Settings → Markets page.
2. In the Other markets section, click Preferences.
3. Check Include or exclude tax based on your customer's country checkbox.
4. Save your changes.

In case your customers are for the most part businesses (B2B) you can choose to have your product prices displayed as excluding VAT.

To display your product prices excluding VAT:

1. In your Shopify admin, go to the Settings → Taxes page.
2. In the Tax calculations section, uncheck the All prices include tax and save your changes.

As of 2022, the current rate of VAT (MwSt or Mehrwertsteuer) in Germany is 19%. There are also other reduced VAT rates of 7% and 0% that apply to products such as e-books, books, newspaper, medical equipment, or transport charges.

In the EU, you need to charge different tax rates when selling physical goods and digital goods, depending on the taxable turnover of your online store.

When selling physical goods to customers in Germany—both VAT and non-VAT registered, you should always charge German VAT.

The VAT rate you charge to non-VAT registered customers who are outside of Belgium but still within the European Union depends on whether you breach the “micro-business” threshold of €10,000 (excluding VAT).

If you are selling to VAT-registered businesses in the other EU countries, you should not charge VAT. Shopify calculates the tax rate automatically based on the type of registration set in your tax settings.

Selling within the “micro-business” threshold

If your taxable turnover during the last twelve months outside Germany but still within the EU is below the threshold of €10,000 (excluding VAT), you should charge German VAT to all non-VAT registered customers in the European Union.

To use the “micro-business” taxation scheme, you should apply for the “micro-business” exemption at your local tax authority and have just one VAT number in the EU.

Then, you can set up your tax settings in your Shopify admin. This task only needs to be performed once.

To set VAT rates for the “micro-business” exemption scheme and charge your home country's VAT rates on all orders:

1. In your Shopify admin, go to the Settings → Taxes and duties page.
2. In the Countries/regions section, click on European Union.
3. In the Shipping within the EU section, click on Collect VAT.
4. In the Collect VAT window, select the Micro-business exemption option and click Next.
5. Select your Registration country and enter your VAT number. Leave this field blank if you have applied for a VAT registration number but don't have one yet. You can update it later when you receive it.
6. Save your changes by clicking on the Collect VAT button.

Surpassing the “micro-business” threshold

If your taxable turnover in the last twelve months outside Germany but still within the EU is above the threshold of €10,000 (excluding VAT), you must register for VAT in each of the countries you are selling to and pay their rate of VAT in that country.

This means that customers from different EU countries should be charged with different VAT rates, varying from 17% to 27%.

For example, your business is located in Germany, and you sell goods to consumers in Belgium and France. If your total sales to Belgium and France are below the €10,000 threshold, then you charge German VAT at 19%.

However, if your total sales in Belgium exceed the threshold of €10,000, then you must register for VAT in both Belgium and France and charge Belgium VAT at 21% on goods sold in Belgium and French VAT at 20% on goods sold in France.

When breaching the threshold, registering for VAT in each EU country can become time-consuming and complicated. In this case, you can choose to use the One-Stop Shop (OSS) Union scheme. This allows you to still charge VAT at the rate of the country where you are selling, but you only have to report on one OSS VAT return.

To charge your Belgium and French customers with the correct VAT rate, you need to set your tax settings accordingly. Shopify gives you the option to select OSS as your VAT registration type, allowing you to charge correct VAT rates automatically.

To set VAT rates for the OSS scheme and charge your customers' shipping country VAT rates on all orders:

1. In your Shopify admin, go to the Settings → Taxes and duties page.
2. In the Countries/regions section, click on European Union.
3. In the Shipping within the EU section, click on Collect VAT.
4. In the Collect VAT window, select the One-Stop Shop registration option and click Next.
5. Select your Registration country and enter your VAT number. If you have applied for a VAT registration number but don't have one yet, leave this field blank. You can update it later when you receive it.
6. Save your changes by clicking on the Collect VAT button.

Now, your customers' shipping country VAT rates automatically apply to all EU sales.

Selling with a country-specific registration

Some businesses may decide to continue to hold tax registration for each EU country they ship to. If that is your case, in Shopify, you are able to add a local VAT registration number for a different country, which allows you to charge the correct VAT rates. Shopify will then automatically apply VAT rates based on your VAT registration.

To add the local VAT registration number:

1. In your Shopify admin, go to the Settings → Taxes and duties page.
2. In the Countries/regions section, click on European Union.
3. In the Shipping within the EU section, click on Collect VAT.
4. In the Collect VAT window, select the Country-specific registration option and click Next.
5. Select Country and enter your VAT number. If you have applied for a VAT registration number but don't have one yet, leave this field blank. You can update it later when you receive it.
6. Save your changes by clicking on the Collect VAT button.
7. To add the local VAT registration number for every country you are registered in click on the Add country option and confirm the selection by clicking on the Add country button.

If you are not able to select the additional country you are VAT-registered in, you may need to create a shipping zone first. To create a shipping zone:

1. In your Shopify admin, go to the Settings → Shipping and delivery page.
2. In the Shipping section, click Manage rates → Create shipping zone.
3. Type in the name of the shipping zone, add the country (or countries) you are VAT-registered in using the search bar, and when finished, click Done.
4. To make this zone available, add the shipping rates.
5. Save your changes.

There are special rules for selling digital goods from Germany to other EU countries and the UK. But firstly, it is critical to understand what exactly digital services are.

Digital goods or services include radio and television broadcasting services, telecommunication services, and electronically supplied services, such as online magazines, music, films, and games.

Even though a company uses the internet to facilitate trading, this does not always mean that they provide e-services. For example, the sale of goods where the order and processing are done electronically (such as through a Shopify store) is not a supply of digital services. This is regarded as a sale of goods and follows the usual VAT rules set out above.

The VAT rules when selling digital services

If you are making supplies of digital services from Germany to other EU countries or to UK consumers, there is no registration threshold (such as the exemption for micro-businesses of €10,000).

Therefore, if you are selling to individuals or non-VAT registered businesses, you must register for VAT in that country and charge its VAT rate to your customers there.

If you are selling digital services to VAT-registered businesses, then they are responsible for any VAT due to the tax authorities in their country.

Having to register for VAT in multiple countries can be quite time-consuming. Shopify store owners in Germany selling to other countries in the EU (excluding Northern Ireland) can register for VAT Mini One Stop Shop (MOSS). The MOSS scheme allows businesses to report the VAT due on services in their own country via a web portal.

Once you set your tax rates correctly in your store, Sufio will automatically create valid invoices with an exact breakdown of the charged VAT.

Invoices can be created in multiple languages and include all the necessary details to make them compliant with invoicing legislation in the EU.

Issuing invoices with the correct tax breakdown is crucial for your bookkeeping and tax purposes.

If you are selling to businesses (B2B), Sufio invoices include all the required information, as well as the VAT registration number (USt-IdNr. or Umsatzsteuer-Identifikationsnummer) of your online store and your business customers.