VAT Woes Solved: How to Exclude VAT at Shopify Checkout for EU Customers
Navigating VAT Exemptions at Shopify Checkout: A Community Deep Dive
Hey everyone! So, I was browsing the Shopify Community the other day and stumbled upon a really interesting discussion about handling VAT exemptions at checkout. It seems like a lot of store owners, especially those on Shopify Plus, are grappling with how to automatically exclude VAT for customers with valid EU VAT numbers, while still charging VAT to customers in their own country (like the Netherlands, in this case).
The original poster, rafay-bsa, was facing this exact issue. They'd built a custom app that validates VAT numbers using an external API and correctly identifies the VAT country. The tricky part? Actually adjusting the checkout total to reflect the VAT exemption *after* the validation. Sounds familiar? You're not alone!
The Challenge: Adjusting the Checkout Total
rafay-bsa explained the core problem really well:
- If a customer provides a valid VAT number from another European country, VAT should be excluded from the total price (deferred / reverse-charged VAT).
- If the VAT number belongs to the Netherlands (NL), VAT should not be deferred, and tax should continue to be applied as normal.
They were specifically looking for a Shopify API, Shopify Function, or recommended approach to modify or exempt the tax amount during checkout after the VAT number is validated, all while respecting those country-specific rules. Let's dive into some potential solutions that came up.
Possible Solutions: Shopify Functions and the Checkout Extensibility API
One suggestion, which is definitely the most robust approach, involves using Shopify Functions with the Checkout Extensibility API. This allows you to create custom tax logic. The idea is that you'd apply zero tax for valid non-NL EU VAT numbers, while maintaining standard VAT for NL-based customers. This is a powerful option, but it does require some development effort.
Here's the original suggestion:
Original Question/Post by Josh_digital:
Use Shopify Functions with the Checkout Extensibility API to create a custom tax logic that applies zero tax for valid non-NL EU VAT numbers, while maintaining standard VAT for NL-based customers.
A Simpler Approach: Customer Tax Exemption
RodrigoJantsch offered a simpler, though potentially less reliable, suggestion: try setting the customer.taxExempt property after the VAT validation. The hope is that this would trigger a refresh of the checkout and remove the taxes. This is definitely worth a shot as a first step, but be aware that it might not always work perfectly, especially with complex checkout customizations.
Answer/Reply 1 by RodrigoJantsch:
Hi @rafay-bsa ,
I have never implemented something like this, but have you tried to set the customer.taxExempt after you did the validation to see if that would refresh the checkout and remove the taxes?
Regards,
Rodrigo
Putting it All Together: A Step-by-Step Approach
Based on the community discussion, here’s a combined approach you could try:
- Implement VAT Number Validation: Use an external VAT validation API (there are many available) within your custom Shopify app to validate the VAT number entered by the customer.
- Determine VAT Country: Based on the API response, identify the country associated with the VAT number.
- Conditional Tax Exemption:
- For non-NL EU VAT numbers: Attempt to set
customer.taxExempt = true. Test thoroughly to see if this reliably removes the VAT from the checkout total. - For NL VAT numbers: Do nothing. The standard VAT rules should apply.
- For non-NL EU VAT numbers: Attempt to set
- If
customer.taxExemptis unreliable: Implement a Shopify Function using the Checkout Extensibility API to create custom tax logic. This will give you more granular control over the tax calculation. You'll need to write code that checks the VAT country and applies the appropriate tax rules. - Testing, Testing, Testing: Thoroughly test your implementation with various VAT numbers and countries to ensure it's working correctly. Pay close attention to different product types and shipping destinations.
Remember rafay-bsa's original post? Here it is for reference:
Answer/Reply 2 by rafay-bsa:
Hello,
I am currently using Shopify Plus and working on a store where I want to implement a feature that excludes VAT from the total checkout price when a customer provides a valid VAT number.
The desired behavior is as follows:
-
If a customer provides a valid VAT number from another European country, VAT should be excluded from the total price (deferred / reverse-charged VAT).
-
If the VAT number belongs to the Netherlands (NL), VAT should not be deferred, and tax should continue to be applied as normal.
To achieve this, I am customizing the checkout experience by rendering a VAT input field where customers can enter their VAT number. The VAT number is validated using an external VAT validation API, and based on the VAT country, I determine whether VAT should be exempted or applied.
So far, I have built a custom Shopify app that successfully:
-
Renders the VAT input field on the checkout page
-
Validates the VAT number using external APIs
-
Correctly determines the VAT country
This part is working correctly.
However, I am currently stuck on adjusting the checkout total. Even after successful VAT validation for non-NL European VAT numbers, the tax amount is still included in the total and displayed below the price (for example: “including €12.56 in taxes”). I am unable to find a way to reduce or remove this tax amount from the checkout total.
Could you please advise if there is any Shopify API, Shopify Function, or recommended approach that allows modifying or exempting the tax amount during checkout after VAT validation, while also supporting country-specific rules (such as not deferring VAT for NL)?
Any guidance on how to correctly implement VAT tax exemption in this scenario would be greatly appreciated.
Thank you for your time and support.
Ultimately, the best approach will depend on the complexity of your store and your development resources. Starting with the customer.taxExempt property is a good first step, but be prepared to implement a more robust solution using Shopify Functions if needed.
Handling VAT can be tricky, but hopefully, this breakdown of the community discussion gives you a solid starting point. Remember to thoroughly test any changes you make to your checkout process to ensure a smooth experience for your customers!