You switched on Shopify Markets, the orders started arriving from Ireland, Germany and the United States, and now you're staring at a checkout that may or may not be charging the right VAT. That's the moment most UK sellers realise cross-border VAT is its own discipline.
Here's the part nobody tells you up front. Shopify Markets is a great tool for showing the right prices in the right currencies, but it does not decide your VAT obligations and, in most cases, it does not pay the VAT for you. You do.
This guide walks through the four things that actually govern your liability: the EU 10,000 euro distance selling threshold, the One Stop Shop (OSS), the Import One Stop Shop (IOSS), and the UK 135 pound import rule for goods coming the other way. It's written for UK-based Shopify sellers shipping physical goods. All figures are for the 2025/26 tax year and cited to gov.uk at the end.
Does Shopify collect and pay my cross-border VAT?
In almost all cases, no. Shopify is an ecommerce platform that hosts your shop, not an "online marketplace" in HMRC's legal sense, so the VAT obligation stays with you as the seller.
That distinction matters because HMRC treats a true online marketplace as the deemed seller for certain low-value cross-border sales. To count as an online marketplace, a business has to meet all three of HMRC's conditions: it sets the terms on which goods are supplied, it's involved in authorising or facilitating the customer's payment, and it's involved in the ordering or delivery of the goods. A platform that only provides payment processing, listing or advertising is specifically excluded.
Shopify gives you the storefront and tools, but you set your terms, you arrange fulfilment, and you're the seller of record. So unlike a sale through a marketplace such as Amazon or eBay (where the marketplace can become liable for the VAT), a Shopify sale leaves the VAT firmly with you. Shopify Markets can calculate and present duties and import taxes at checkout, but presenting a figure is not the same as registering, filing and paying. That bit is on you.
If you sell on a separate marketplace as well as your own Shopify store, treat the two channels differently. The rules below are about your Shopify store, where you are the seller.
What is the EU 10,000 euro distance selling threshold?
The 10,000 euro threshold is an EU-wide annual limit on business-to-consumer (B2C) cross-border goods sales. Once your total B2C goods sales to consumers across the EU pass it, you charge VAT at the rate of the customer's country rather than your home rate, and you account for it in each destination.
A few points sellers get wrong:
- It's a single combined figure across all EU countries, not per country.
- It applies to B2C distance sales of goods (and certain digital services). Sales to VAT-registered EU businesses are handled differently.
- HMRC quotes the sterling equivalent as roughly 8,818 pounds, but the legal threshold is the 10,000 euro figure.
Here's the wrinkle for UK sellers. The 10,000 euro threshold and OSS sit inside EU and Northern Ireland VAT rules. If your goods are shipped from Great Britain (England, Scotland or Wales) into the EU, each parcel is an import into the EU, so the threshold and the Union OSS scheme described below are not the route for you. The threshold is most relevant if you hold or dispatch stock from Northern Ireland, or from within the EU. We unpack that next.
What is OSS and can a UK seller in Great Britain use it?
The One Stop Shop (OSS) Union scheme lets you report and pay the VAT on your EU distance sales in a single quarterly return, instead of registering for VAT in up to 27 separate EU countries. The catch for most UK sellers is who can use it.
HMRC's OSS Union scheme covers distance sales of goods from Northern Ireland to consumers in the EU. If your stock dispatches from Great Britain, you can't use HMRC's OSS for those parcels, because goods leaving GB enter the EU as imports rather than intra-EU distance sales. Sellers in that position typically register for OSS in an EU member state instead, or use IOSS for low-value consignments (below).
If you do qualify (goods moving from Northern Ireland to EU consumers), the mechanics are straightforward:
- You must be registered for UK VAT first, even if your domestic turnover is below the 90,000 pound registration threshold for 2025/26.
- Returns are quarterly. You file from the first day of the month after the quarter ends and the deadline is the last day of that month. So the quarter to 31 March is due by 30 April, the quarter to 30 June by 31 July, and so on.
- You report the value of sales and VAT due at each rate, for each EU country.
- Amounts go on the return in pounds sterling. Where you need to convert, you use the European Central Bank exchange rates published on the last day of the quarter.
Miss the deadline and HMRC issues a reminder on the tenth day after it, giving you a further short window. Repeatedly missing it can get you removed from the scheme.
What is IOSS and the 150 euro consignment limit?
The Import One Stop Shop (IOSS) is the scheme for low-value goods imported into the EU (and Northern Ireland) and sold to consumers. It lets you charge the customer's local VAT at checkout and report it on a single monthly return, so the parcel clears customs without VAT being collected again at the border.
The defining figure is the consignment value: IOSS covers goods imported in consignments not exceeding an intrinsic value of 150 euros (which HMRC also expresses as 135 pounds). Key rules:
- It's a B2C scheme for low-value consignments. Above 150 euros, normal import VAT and customs rules apply at the EU border instead.
- Excise goods such as alcohol and tobacco are excluded.
- Returns are monthly, and you pay HMRC one monthly total covering all eligible sales.
- A business based outside the EU and Northern Ireland (which includes a Great Britain seller) generally has to appoint an intermediary to register and act on its behalf to use the EU scheme.
For a GB-based Shopify seller shipping small parcels into the EU, IOSS is often the practical answer, because it removes the customs friction your customer would otherwise feel and keeps the buying experience clean. The trade-off is the monthly filing and, usually, an intermediary.
What is the UK 135 pound import rule for sales into Great Britain?
This is the mirror image, and it catches out UK sellers who also dropship or hold stock abroad and ship into Great Britain. For goods located outside the UK at the point of sale and sold directly to a GB customer in a consignment of 135 pounds or less, UK supply VAT is charged at the point of sale, not as import VAT at the border.
The detail that matters:
- The 135 pound test uses the intrinsic value: the price the goods sold for, excluding transport, insurance and any separately identifiable taxes and charges.
- For a consignment of several items, you add the individual values together to test against 135 pounds.
- Above 135 pounds, normal import VAT and customs rules apply on importation into Great Britain.
- For B2B sales, if your UK business customer gives you their UK VAT registration number, you don't charge VAT at the point of sale. Instead you note the reverse charge on the invoice (for example, "reverse charge: customer to account for VAT to HMRC"), and the customer accounts for the VAT on their own return.
If those direct-to-GB sales run through a genuine online marketplace, the marketplace can become liable for the VAT instead. On your own Shopify store, you are the seller, so the obligation is yours.
Illustrative example: a UK Shopify seller shipping to Ireland
Illustrative example. Maya runs a Shopify store selling candles, with stock held in Northern Ireland and shipped to consumers across the EU. In the 2025/26 year her total B2C sales to EU consumers reach 22,000 euros, so she's over the 10,000 euro distance selling threshold and charges destination-country VAT.
Take a single order to a consumer in Ireland with a VAT-inclusive price of 60.00 euros. Ireland's standard VAT rate is 23%.
To find the VAT inside a VAT-inclusive price, divide by 1.23:
- Net (VAT-exclusive) value: 60.00 / 1.23 = 48.78 euros
- VAT at 23%: 48.78 x 0.23 = 11.22 euros
- Check: 48.78 + 11.22 = 60.00 euros
Across the quarter, Maya makes 400 similar Irish orders. Her Irish-rate totals are:
| Line | Amount |
|---|---|
| Net sales (Ireland) | 19,512.00 euros |
| VAT at 23% (Ireland) | 4,488.00 euros |
| Gross sales | 24,000.00 euros |
Because her stock dispatches from Northern Ireland, Maya can use HMRC's OSS Union scheme. She reports the Irish net sales and VAT (alongside any other EU countries) on one quarterly OSS return, converting to pounds sterling using the European Central Bank rate on the last day of the quarter, and pays HMRC once. No separate Irish VAT registration needed.
Had Maya instead held that stock in Great Britain, those parcels would be EU imports rather than intra-EU distance sales, so HMRC's OSS wouldn't be the route. For low-value parcels she'd more likely look at IOSS (via an intermediary) to charge Irish VAT at checkout and clear customs smoothly. The figures are illustrative and the VAT rate shown is Ireland's, not a UK rate.
Decision steps: which scheme do I need?
Run your Shopify cross-border sales through these questions. They're a starting point, not formal advice.
- Is the customer a consumer (B2C) or a VAT-registered business (B2B)? B2B sales to a VAT-registered buyer usually shift the VAT to the customer; the schemes below are mainly about B2C goods.
- Where does the stock ship from? Northern Ireland to the EU can use HMRC's OSS Union scheme. Great Britain to the EU is an import, so look at IOSS or an EU registration.
- Are you over the 10,000 euro EU-wide threshold? Over it, you charge destination-country VAT on B2C goods. Under it, different treatment can apply, but most growing stores cross it quickly.
- What's the consignment value? Low-value consignments up to 150 euros (EU) or 135 pounds (into Great Britain) trigger the point-of-sale VAT rules and the IOSS / UK 135 pound regimes. Above those, normal import VAT and customs apply.
- Are goods coming into Great Britain from abroad? Then the UK 135 pound rule applies to your direct sales, with the reverse charge available for VAT-registered UK business customers.
If you're not sure which boxes you tick, that's normal. Getting registration and filing right across OSS, IOSS and UK import VAT is exactly the kind of thing we handle for Shopify sellers day to day, and it pays to set it up correctly before the orders scale.
Cross-border VAT also sits on top of your normal UK obligations. All VAT-registered businesses must keep digital records and file under Making Tax Digital for VAT, and your domestic VAT returns still run in parallel with any OSS or IOSS filing.
Frequently asked questions
Does Shopify register for VAT or pay cross-border VAT for me?
No. Shopify is an ecommerce platform, not an online marketplace in HMRC's sense, so it doesn't take on your VAT liability. It can display duties and import taxes at checkout, but registering, filing and paying VAT under OSS, IOSS or UK rules remains your responsibility as the seller.
Can a Great Britain Shopify seller use HMRC's OSS scheme?
Not for goods shipped from Great Britain. HMRC's OSS Union scheme covers distance sales of goods from Northern Ireland to EU consumers. Goods leaving Great Britain enter the EU as imports, so GB sellers typically use IOSS for low-value parcels or register for OSS in an EU member state.
What is the 10,000 euro threshold and is it per country?
It's a single EU-wide annual limit on B2C distance sales of goods (and certain digital services), not a per-country figure. Once your combined EU B2C sales pass 10,000 euros (about 8,818 pounds), you charge VAT at the customer's country rate. Most scaling Shopify stores cross it quickly.
What is the difference between IOSS and the UK 135 pound rule?
IOSS handles low-value goods (consignments up to 150 euros) imported into the EU or Northern Ireland and sold to consumers, with a monthly return. The UK 135 pound rule is the reverse: for goods outside the UK sold to a Great Britain consumer in a consignment of 135 pounds or less, you charge UK VAT at the point of sale instead of import VAT at the border.
Do I charge VAT on a Shopify B2B sale to an EU or UK business?
Generally the VAT shifts to the business customer rather than you charging it at checkout. For low-value goods sold into Great Britain to a UK VAT-registered business that gives you its VAT number, you note the reverse charge on the invoice and the customer accounts for the VAT. Always keep evidence of the customer's VAT status.
How often do I file OSS and IOSS returns?
OSS returns are quarterly, due by the last day of the month after each calendar quarter ends. IOSS returns are monthly, with one monthly payment to HMRC covering all eligible low-value sales.
Talk to an e-commerce accountant →
Get your Shopify VAT set up right
Cross-border VAT is one of the few areas where getting the structure wrong early costs real money to unwind. If you're selling internationally through Shopify Markets and want OSS, IOSS and UK import VAT handled properly, talk to Zmartly's accountants for Shopify sellers and we'll map your obligations to how your store actually ships.
