Special VAT territories in the EU. Implications for Shopify and WooCommerce

This guidelines provide general explanations about the EU VAT territorial scope and special VAT territories in the European Union.

European and specifically EU VAT territory is complicated and influenced by the historical and geographical factors. Guidelines in general explain how IOSS rules apply to various existing VAT situations,

Official list of EU country / Territories related with EU countries

The tables below provide a list of the EU countries and certain territories where the EU rules regulating customs, VAT and excise apply or not apply.

EU country / Territories related with EU countries	Territory of the EU	Customs rules apply	EU VAT rules apply (Including IOSS)	Excise rules apply
Austria	yes	yes	yes	yes
Belgium	yes	yes	yes	yes
Bulgaria	yes	yes	yes	yes
Croatia	yes	yes	yes	yes
Cyprus	yes	yes	yes	yes
Czech Republic	yes	yes	yes	yes
Denmark	yes	yes	yes	yes
Denmark / Faroe Islands	no	no	no	no
Denmark / Greenland	no	no	no	no
Estonia	yes	yes	yes	yes
Finland	yes	yes	yes	yes
Finland / The Åland Islands	yes	yes	no	no
France	yes	yes	yes	yes
France / French overseas territories	no	no	no	no
France / Guadeloupe, French Guiana, Martinique, Réunion, Mayotte, Saint-Martin	yes	yes	no	no
Germany	yes	yes	yes	yes
Germany / The Island of Heligoland	yes	no	no	no
Germany / The territory of Büsingen	yes	no	no	no
Greece	yes	yes	yes	yes
Greece / Mount Athos	yes	yes	no	yes
Hungary	yes	yes	yes	yes
Ireland	yes	yes	yes	yes
Italy	yes	yes	yes	yes
Italy / Livigno	yes	no	no	no
Italy / Campione d'Italia	yes	yes	no	yes
Italy / The Italian waters of Lake Lugano	yes	yes	no	yes
Latvia	yes	yes	yes	yes
Lithuania	yes	yes	yes	yes
Luxembourg	yes	yes	yes	yes
Malta	yes	yes	yes	yes
Netherlands	yes	yes	yes	yes
Netherlands / Netherlands Antilles	no	no	no	no
Poland	yes	yes	yes	yes
Portugal	yes	yes	yes	yes
Portugal / Azores	yes	yes	yes	yes
Portugal / Madeira	yes	yes	yes	yes
Romania	yes	yes	yes	yes
Slovakia	yes	yes	yes	yes
Slovenia	yes	yes	yes	yes
Spain	yes	yes	yes	yes
Spain / Ceuta	yes	no	no	no
Spain / Melilla	yes	no	no	no
Spain / The Canary Islands	yes	yes	no	no
Sweden	yes	yes	yes	yes

Other countries or territories in Europe

Other countries or territories	Specific rules	EU Treaties apply	Customs rules apply	VAT rules apply	Excise rules apply
Monaco	Treated as territory of France for customs, VAT and excise purposes	no	yes	yes³	yes³
San-Marino	Treated as territory of Italy for customs and excise purposes	no	yes	no	yes³
UK Sovereign Base Areas of Akrotiri and Dhekelia	Treated as territory of Cyprus for customs, VAT and excise purposes	no⁴	yes	yes³	yes³
Gibraltar	...	no	no	no	no
Andorra	...	no	no	no	no
Vatican City	...	no	no	no	no
Northern Ireland	Treated as territory of the EU for customs, VAT (for goods only) and excise purposes	no	yes	Partly goods only	yes

All countries and territories may be separated in the following groups:

EU countries . There are 27 countries that are members of the European Union. Northern Ireland is a remnant of the UK in the EU and is treated for some situations as an EU country (territory). Most of the sales made to the EU countries can be done as IOSS , provided that the order is below the 150 EUR threshold and do not contain excise goods.
Non EU countries. Switzerland , Lichtenstein, Norway , the United Kingdom , Andorra , Vatican, Serbia , Bosnia-Herzegovina, Macedonia , Montenegro, Albania, Island and Vatican are fully independent countries to which EU VAT laws are not applicable. Kosovo is not a fully recognized country but is considered as such for business purposes. Any sales made to these countries are not to be subject to the EU special schemes like IOSS and should be handled as DDU or DDP with application of local rules.
Associated countries and special status territories where some of the EU rules may apply. Monaco, even though being a monarchy within the French republic , is considered a territory of France for fiscal purposes (Shopify does not believe that J ) . San Marino is a part of customs territory of EU but VAT rules do not apply there (and hence no IOSS). UK Sovereign Base Areas of Akrotiri and Dhekelia is a special territory where fiscal rules of Cyprus apply (including VAT rules and IOSS) . Portugal applies special reduced VAT rates for sales made to Azores and Madeira.
National territories that are part of EU countries but which are outside of the EU VAT territory. EU VAT rules do not apply to these territories. The following EU countries have such territories:

EU country	Special territory
Denmark	Faroe Islands
Denmark	Greenland
Greece	Mount Athos
Finland	The Åland Islands
France	Guadeloupe, French Guiana, Martinique, Réunion, Mayotte, Saint-Martin other overseas territories
Germany	The Island of Heligoland
Germany	The territory of Büsingen
Italy	Livigno
Italy	Campione d'Italia
Italy	The Italian waters of Lake Lugano
The Netherlands	Netherlands Antilles
Spain	Ceuta
Spain	Melilla
Spain	The Canary Islands

5. UK special territories and dependencies. Gibraltar, Jersey, Guernsey are territories and dependencies of the British crown which are outside of the UK VAT territory. Special VAT rules apply there and supplies between these territories and UK are akin to the international trad . Island of Man forms a single territory with the United Kingdom, and the VAT rules are mostly identical (Shopify still believes it is a separate country J, at least for the taxation purposes)

6. Northern Ireland

To ensure that there would be no “hard” border between the republic of Ireland and Northern Ireland a special regime was introduced for Northern Ireland. Multiple amendments to the North Ireland arrangements have been introduced since Brexit. Current version of regulations the Windsor framework revised and amended the original Northern Ireland Protocol.

Presently the rules for supply from outside of the UK to Northern Ireland in respect of application of IOSS /OSS rules (and we simplify them for the purpose of this blog ) are as follows:

B2C deliveries below the 135 GBP threshold form the outside the UK and EU are considered as IOSS , provided that goods do not contain excise items
B2C deliveries from EU to the Northern Ireland are subject to Union OSS rules, same applies to sales from Northern Ireland to the EU.

EAS EU compliance applications and plugins have special settings for Northern Ireland situations.

Practical applications for Shopify and WooCommerce

Shopify

As we already hinted above , Shopify has their own ideas on what is a sovereign country and how taxation should be applied there. Shopify will not recognize Canary islands as a special territory , while Faroe Islands, Aland Islands, Greenland, Monaco are viewed as separate taxation territories. EAS suggest that Monaco is set with a standard rate 20 percent while EU taxation is configured. This setting is always performed in case when EAS setups the store for the merchant. VAT will be always automatically collected for Canary islands, Ceuta , Melilla (all part of Spain), Azores and Madeira (both Portugal) and special territories in Germany , Greece, Italy and the Netherlands. Merchants have to manually reimburse customers from these territories.

EAS will always automatically exclude sales made to territories outside of the EU VAT territorial scope from fiscal reporting, even if Shopify tax engine actually calculates VAT for such orders.

Faroe islands , Aland islands, Greenland , Monaco and most of the French overseas territories will be excluded as they are considered as separate fiscal territories and there is a possibility to set taxation rules for them separately (remember that these territories are not in the EU VAT territorial scope and sales to these place should not be taxed if you only use IOSS). Since Monaco is part of the EU VAT territory is should be set as taxable and with French tax rates applied.

Shopify directly cannot handle any rules related to Northern Ireland. EAS uses its own logic and rules to ensure that sales to Northern Ireland and from Northern Ireland are handled in accordance with applicable VAT rules

WooCommerce

Since WooCommerce is much more flexible. When EAS support manager configures merchant’s WooCommerce store all VAT considerations will be taken into view and special territories will be excluded from taxation. Special reduced rates will also be applied to Azores and Madeira in Portugal. As such the process is fully automated and there is no need for any manual indolent for handling of sales to special territories.

EAS handles all situations related to Northern Ireland status properly without the need of merchant’s manual involvement.

EAS is always happy to help with additional information related to taxation in special territories and provide needed practical data.