Where taxes are configured in Shopify
Taxes are managed in the taxes and duties section of your store settings. That is where you indicate in which countries and regions you are required to collect tax, register your tax ID number and decide how prices are displayed.
Shopify applies default tax rates for each country, but it does not know your specific situation: whether you are registered under a special scheme, whether you sell products at reduced rates or whether you have obligations in other countries. So the default configuration is a starting point, not a guarantee. Confirm everything in this guide with your tax advisor.
IVA in Spain and tax-inclusive prices
The standard rate of IVA (Spanish VAT) is 21%. If you sell to consumers, the price you display must be the final price, taxes included. On Shopify this is controlled with the option to include taxes in prices: the prices you enter on products already include VAT, and Shopify breaks it out on the order.
If your catalog includes products taxed at a rate other than the standard one, Shopify lets you create tax overrides per collection or per product. Which rate applies to each product is a tax question: confirm it with your advisor before configuring it.
- Turn on tax-inclusive pricing if you sell to consumers.
- Check that your product prices already include VAT.
- Check whether shipping charges should be taxed in your case.
- Use overrides only for products that are actually taxed differently.
Sales to other EU countries and the OSS scheme
When you sell to consumers in other European Union countries, above a certain volume of cross-border sales you have to charge the customer's country VAT. To avoid registering in every country there is the One-Stop Shop, known as OSS, which lets you report that VAT from Spain.
On Shopify, if you are registered for OSS, you indicate it in the European Union tax settings and the platform applies each destination country's rate at checkout. If you do not exceed the thresholds or are not registered, Spanish VAT applies. Whether this applies to you and from when is something to assess with your tax advisor.
For sales to businesses in other EU countries with a valid intra-community VAT number, the treatment may be different. Shopify lets you collect that number in certain configurations, but validation and tax treatment must be reviewed with your advisor.
The Canary Islands, Ceuta and Melilla
The Canary Islands, Ceuta and Melilla do not apply mainland Spanish VAT. The Canary Islands apply IGIC and Ceuta and Melilla apply IPSI, and shipments to these territories may involve customs procedures. This affects both the taxes you charge and your logistics.
On Shopify you can treat these zones separately in your shipping and tax settings, with their own shipping rates and adjustments to the tax calculation. How a sale to these territories should be invoiced depends on your case, so define the setup with your advisor and check with your carrier how it handles the paperwork.
Invoices: what Shopify does and what it does not
Shopify generates orders and notifications with a tax breakdown, but that is not the same as an invoice that complies with Spanish regulations, with sequential numbering, complete tax details and proper record keeping. Invoicing apps are used for that.
When choosing an invoicing app, check that it complies with current Spanish regulations, including the requirements for verifiable invoicing systems, and that it integrates with your accounting software or your accountant.
- Sequential numbering and separate series if you need them, for example for corrective invoices.
- Customer tax details when requested, especially on sales to businesses.
- Automatic corrective invoices when you issue a refund.
- Automatic sending of the invoice to the customer and export for accounting.
Taxes on sales to businesses
If you also sell to professionals, it is common to show them prices excluding VAT even though the rest of the store shows prices with tax included. With Shopify's B2B features you can configure how prices and taxes are displayed to each company and record their tax details on the company location.
There are also cases of exemption or reverse charge on certain transactions. Shopify lets you mark customers or companies as tax exempt, but you should only do so when your tax advisor confirms the transaction allows it and you keep the supporting documentation.
How to check everything is right
Before opening the store, place test orders covering different cases: a customer on the mainland, one in the Canary Islands, one in another EU country and, if you sell to businesses, one with tax details. On each order, check the tax applied, the total and the invoice generated.
Repeat the check whenever you change something relevant: a new market, a different tax scheme or a new invoicing app. At Weblineo we work only with Shopify and, on every build, we leave the tax configuration set up according to your advisor's instructions and train you to review it.
Frequently asked questions
Does Shopify calculate VAT automatically?
Yes, based on the settings you define. It applies default rates by country, but you should check with your advisor that they fit your specific tax situation.
Do I have to show prices with VAT included?
If you sell to consumers in Spain, the displayed price must be the final price including taxes. On Shopify you turn this on with the option to include taxes in prices.
Does Shopify issue valid invoices in Spain?
Shopify generates orders with a tax breakdown, but for invoices that comply with Spanish regulations you need an invoicing app adapted to them.
What about orders to the Canary Islands?
The Canary Islands do not apply mainland Spanish VAT but IGIC, and shipments may involve customs procedures. Set up the zone separately and confirm the treatment with your tax advisor.
How are taxes handled on a refund?
When you refund an order, Shopify also refunds the proportional share of taxes. For your accounting you will also need a corrective invoice, which the invoicing app usually generates.