In your own store, you are always faced with tax challenges - especially when it comes to foreign trade and VAT.
So that you can focus on more important areas of your e-commerce business again in the future, our developer team created an app for Shopify stores some time ago, which has recently been further developed and supplemented with some functions: Our Tax Exempt Manager.
In this post, we'll show you how your international B2B customers can use TEM to get the correct VAT rates per country and exact net prices displayed in the checkout.
Are you in B2B business and haven't found a solution for your tax challenges in the store yet? Just download Tax Exempt Manager and benefit from many advantages!
Download TEM in the App Store
You need help with you store? Feel free to contact us and we will be happy to help you. Contact us
Value added tax in international e-commerce
Both domestic sales and sales to countries outside the EU are clearly regulated:
If you sell products in Germany, you will be charged VAT (exception: small business regulation).
However, when selling to countries outside the EU, you do not have to show VAT.
However, things get a bit more complicated when selling from one EU country to another: here, different rules apply to VAT for different customer segments and products. The main difference is between B2B and B2C sales:
Business-to-Customer: If you sell to private customers (B2C) in another EU country, you have to pay VAT. In this case, the German VAT rate applies in part and that of the country in which your customer is located in part.
Business-to-Business: In B2B business within and outside the EU, cross-border deliveries to businesses are tax-free in the country of origin, while the buyer must pay VAT in the country of destination. For sales outside the EU, there is an obligation to prove that the goods were exported to a country outside the EU.
Reading tip: Learn 7 tips to increase your average order value even on regular days.
Shopify merchant challenges related to VAT
These different regulations cause worry lines on the foreheads of Shopify merchants from time to time. This is because the store system has two special features if you also want to offer your products outside of Germany and sell them to business customers at the net price.
We now know: when selling to customers inside and outside the EU, the basic rule is that you do not have to charge these customers VAT and therefore do not have to pay VAT to the tax office. However, if you have created all prices including VAT as a total price in your store, you may wonder why, for example, the price at the checkout for US customers has not changed despite the elimination of VAT. Because in this case, Shopify only shows the tax portion as 0% or 0€ and does not deduct the VAT from the cart value.
Of course, this 0% or 0€ is not wrong per se, however, your customer still has to pay the full offer price here, even if you could actually offer them a net price. This is theoretically very easy to implement, but you have to convert all prices in your store (i.e. product prices and shipping) into net prices. The theme of your store must then be adjusted so that the total price is displayed again. The background: if you sell to the end consumer, you must always display the final price, i.e. including VAT. To do this, whenever the price is displayed in the theme, the net price must be converted to the gross price.
If you only sell products in your store that are subject to the full VAT rate (19% in Germany), simply multiply the net price by 1.19. If, in addition, you also sell products with a reduced VAT rate (7% in Germany), things get a bit more complicated. In this case, you will need to multiply by 1.19 or 1.07 depending on the product. Once the prices are all converted to net, you need to proceed as follows: Under Settings → Taxes there is a checkbox All taxes are included in my prices. Now that you have created a product with net price, you need to uncheck this box.
At the checkout, these changes now mean that for sales to international B2B customers, not only is the VAT shown as 0%, but the stored net price is actually applied. In this constellation, Shopify adds the VAT to the net price according to the tax settings under Settings → Taxes and also the 0€ if the corresponding customer has a tax rate of 0%. This way, customers outside the EU can then buy from you at the "real" net price.
Attention: if you change your Shopify store to net and the prices in your theme to gross, there is a small side effect. Depending on the arrangement of the products in the shopping cart, there may be rounding differences.
Reading tip: In this post, we reveal our conversion rate optimization tips and some relevant influencing factors of the same.
How can the Tax Exempt Manager solve these problems?
You see: Manually setting VAT rates for every order from abroad is very time-consuming and should be avoided if possible. So that you don't have to manually adjust each invoice for your B2B customers and check each VAT number individually, the Latori team has developed an app: The Tax Exempt Manager.
With Latori's TEM, you can sell internationally in a legally compliant manner with the applicable tax regulations, allowing you to easily and reliably complete B2B sales without VAT. To enable you to do this, the Latori Apps team has developed an algorithm for the TEM. This automatically records and checks the VAT ID of your B2B customer against the official EU database VIES.
If the VAT ID provided is correct, the amount in the checkout is automatically corrected and your customer can shop without VAT. For this, buyers do not even need to create an account. In addition, the TEM allows your customers to see prices excluding taxes.
Reading tip: For more info on Tax Exempt Manager and how to implement VAT exemption for B2B customers in Shopify, click here.
The advantages of the Tax Exempt Manager at a glance
For Shopify merchants, using Tax Exempt Manager brings numerous benefits:
Time saving: Thanks to the TEM, on the one hand, you no longer have to manually adjust your invoices. On the other hand, you will be spared having to pay back tax to foreign traders who are liable for VAT.
Increase in sales: Due to the VAT exemption within and outside the EU, your sales will increase.
Customer satisfaction: Since your business customers can benefit from the VAT exemption quickly and easily, you increase customer satisfaction and customer loyalty.
Usability: The TEM is easy to install and works with both gross and net prices.
Clarity: Thanks to a list with all the orders created after a positive VAT ID check, you can easily keep track of everything.
Tax Exempt Manager 2: What's new?
This year we have further developed and optimized our Tax Exempt Manager for you. We are happy to show you what our Shopify app has in store for you. In addition to all the features and benefits from the previous two chapters, more have been added to TEM:
|Discount codes||Two application sites||Native control configuration through Shopify|
|Discount codes can be used in addition.||There are two separate modules that can work together. So the TEM can be used in the shopping cart and in the customer account.||The app takes advantage of Shopify's native control configuration.|
|Customizable content||Order tags||Customer tagging|
|You can customize your texts. Example: meta fields translated with Shopify native translation app.||In order to provide your customers with a good overview of their orders, each order is tagged with a valid VAT ID and exempt from tax. Moreover, your buyers have the possibility to rename this tag as they wish.||You can mark your customers for tax free purchases. (The VAT ID is stored in the customer account).|
Reading tip: Here we present you another useful plugin from Latori: The new app for regulating price quotes. With it, you can, among other things, display the lowest comparison price of the last 30 days, which is very important for online merchants, especially since the new Price Indication Regulation of May 2022.
Tax Exempt Manager: Cost, Download & Integration of the Shopify App
You can easily download Tax Exempt Manager from Latori in the Shopify app store. You have the option to try the app for free for 14 days. After that, it costs $9.99 per month.
Installing and using the app is quite simple. You just need to insert the sales tax ID text box and we will provide you with code and instructions for it. Also, TEM promises a seamless workflow through direct access in the Shopify admin area.
We summarize: With our Tax Exemption Manager, you can get a handle on the VAT clutter in your Shopify store. The app not only allows you to show your B2B customers from abroad the exact net prices. It is also safe from counterfeiting, as it only works with confirmed VAT IDs. Installation is also quick and straightforward, and if you want to change any text or the style, you can easily do so by tampering with the code yourself. So what are you waiting for? Save time and increase both sales and customer satisfaction by using Latori's TEM.
Still unclear? We are happy to help you and answer all your questions about the app. Just get in touch with us!
Frequently asked questions about Latori's Tax Exempt Manager
What is the Tax Exempt Manager?
Tax Exempt Manager (TEM) is an app developed by Latori for Shopify merchants. The plugin is used to show B2B customers from abroad the correct VAT rates or the exact net value in the checkout. We present all other advantages and features in the article.
How does the Tax Exempt Manager work?
Behind the Tax Exempt Manager is an algorithm developed by Latori, which checks the VAT ID of your B2B customers against the official EU database VIES. If it turns out to be correct, the price in the checkout is automatically adjusted and your business customer can shop without VAT.
To what extent has the Tax Exempt Manager been further developed in the newer version?
Tax Exempt Manager 2 has been extended with several features, so that now, for example, discounts can be used, you can customize meta fields and other texts, as well as mark your customers for tax-free purchases. We present other new features in the article.