This article explains how much VAT to charge on shipping, postage and delivery charges for orders sent to the EU and UK, including how to handle mixed baskets with more than one VAT rate.
The easiest way to explain it is that shipping normally follows the VAT treatment of the goods being supplied, because shipping is considered an incidental expense that forms part of the same supply.
EU legal basis
Article 78(b) of the VAT Directive states that the taxable amount shall include transport and insurance costs, charged by the supplier to the customer.
This means shipping is generally not treated as a separate service but as part of the overall supply of goods.
Examples
| Goods | VAT rate on goods | VAT rate on shipping |
|---|---|---|
| Books (country applies reduced rate of 5%) | 5% | 5% |
| Children’s clothing (0% where applicable) | 0% | 0% |
| Standard consumer products | 20% (or local standard rate) | 20% |
| Food subject to reduced rate of 10% | 10% | 10% |
EU Commission guidance
The Court of Justice of the EU (CJEU) and national tax authorities generally view delivery as ancillary to the principal supply. An ancillary supply follows the VAT treatment of the principal supply.
The classic test from CJEU case law is that a service is ancillary if it does not constitute for customers an aim in itself, but a means of better enjoying the principal supply. Delivery is almost always regarded as such a means.
Mixed baskets
This is where it becomes more complicated. For example, an order containing:
- Book (€50, VAT 5%)
- Toy (€50, VAT 20%)
- Shipping (€10)
Most Member States require the shipping charge to be apportioned between the VAT rates:
| Component | Amount | VAT rate |
|---|---|---|
| Book share of shipping | €5 | 5% |
| Toy share of shipping | €5 | 20% |
The exact apportionment method may vary by Member State, but proportional allocation by value is the most common approach.
UK position
HMRC follows the same principle. VAT Notice 700/24 effectively treats delivery charges as following the liability of the goods supplied.
- Printed books (zero-rated) → shipping is zero-rated.
- Children’s clothing (zero-rated) → shipping is zero-rated.
- Standard-rated goods (20%) → shipping is 20%.
- Mixed baskets → shipping is apportioned.
One-sentence explanation
Delivery charges are normally treated as part of the supply of the goods and therefore attract the same VAT rate as the goods being delivered. Where multiple VAT rates apply within the same order, the delivery charge is generally apportioned between those rates on a fair and reasonable basis.
For your IOSS/DDP work
This means that if a merchant sells a reduced-rate product (for example books at 5% in France or 7% in Germany), the shipping charge should generally be included in the taxable amount and taxed at the same reduced rate, rather than at the standard VAT rate.