How to Enable VAT Rates for Digital Goods on Shopify

On the Shopify dashboard, you need to click on the ‘Settings’ option and then click on the gear icon beside it. Then you need to go down the first column of the settings list, and you’ll find the ‘Taxes’ option.

There are two sections within the ‘Taxes’ section. The first is the ‘Tax Settings’ and the next is the ‘Tax Rates’. In the ‘Tax Settings’ there is a line that reads ‘Enable EU Digital goods VAT rates’. The ‘Enable’ should be underlined. Click on ‘Enable’ to continue.

After you’ve clicked to enable, another dialog box will display. This will include a short description related to the setup. Be sure to read this information carefully. It will include a lot about the VAT charge. You can then click on the ‘Enable EU Digital Goods VAT Taxes’ button. This will activate the settings.

Now you should see an option that will be stocked that reads ‘Charge EU Digital Goods VAT Taxes’. Below this, you should see ‘Digital Goods VAT Taxes’ in a blue color. You need to select this.

Now you will be directed to the collection for digital goods that need to have VAT taxes charged against them. You should scroll down the page until you get to the ‘Products’ section. Click on the browser button, and then you will need to tick on all the products you want in the list.

Once you’ve done this, click on the ‘Add’ option to move all the selected products to the collection of products that have VAT charged.

For products that need tax override, such as items with special tax rates or exemptions, you may need to create a separate collection or use Shopify’s tax override features. This allows you to apply specific tax rules that differ from your standard VAT settings for digital goods.

By carefully managing your product collections and tax settings, you can ensure that the correct VAT rates or tax overrides are applied to each item in your store.