VAT on shipping costs in e‑commerce: which rate to charge on delivery

Quick answer: delivery charges you invoice to your customer are part of the price of the sale. They are subject to VAT, at the rate of the goods delivered: the standard rate for clothing, a reduced rate for a book where your country applies one. If the basket mixes several rates, you split the delivery charge between them. When you sell to consumers elsewhere in the EU above EUR 10,000 a year, the customer's country's rate also applies to delivery. And an order shipped outside the EU is exempt, delivery included.

In your store, a customer orders an item at €60 and pays €6 for delivery. Out of that €66, how much VAT do you owe? If you said €10, you are missing one: delivery contains VAT too. Over 2,000 orders a year, the gap reaches €2,000, which the tax authority can claim back in an audit.

Who this is for: online sellers established in an EU country who charge VAT. The rules below come from the EU VAT Directive, which applies everywhere in the Union; the examples use France's rates (20% standard, 5.5% for books). If you use your country's small business VAT exemption, you invoice your domestic sales without VAT, products and delivery alike, so most of this article does not apply to you; if you also sell to other EU countries, check your situation with your accountant. These are general guidelines, to be validated by your accountant for your status, your products and the countries you deliver to.

The rule: delivery follows the product

The EU VAT Directive lists transport costs among incidental expenses: those charged by the supplier to the customer are included in the taxable amount of the sale. Delivery is therefore not a separate service with its own rate. As a rule, it takes the rate of what you ship.

One nuance: the Directive allows Member States to treat expenses covered by a separate agreement differently. In e-commerce, where you deliver the goods you sell, this is rarely the case, but your accountant can confirm how your country applies it.

Back to the opening example: an item of clothing at 20% VAT, sold to a consumer for €60 including VAT, with €6 delivery including VAT.

The classic mistake is to treat the €6 delivery charge as if it contained no VAT. You then declare €10 instead of €11: €1 of VAT is missing on every order, even though your customer did pay it.

Displayed price or carrier price? That €6 is the delivery price you show your customer, not what the carrier charges you. Prices shown to consumers in the EU must include VAT, so the €6 already contains it. Your carrier's tariff is a different matter: it is your purchase cost. Depending on the carrier and the document, it may be shown excluding or including VAT: check for that mention on your rate card or invoice before using it to set your delivery price.

What about paid options? Express delivery, parcel insurance, special packaging such as gift wrapping: if you charge your customer for them, they follow the same rule as delivery. The VAT Directive itself names packing and insurance, alongside transport, among the incidental expenses included in the price of the sale. They therefore take the rate of the product.

One basket, several rates

Your customer orders a book (5.5%) and a sweatshirt (20%). Delivery follows the rate of the product, but which one?

The VAT Directive sets no specific method for splitting delivery charges. A method that is simple to justify, and the one Shopify applies, is to split them in proportion to the net value of the items at each rate. Example with €5 delivery excluding VAT, split according to each item's share of the price: the book is 40% of the basket, the sweatshirt 60%.

If your store only sells products at one rate, the question does not arise. Otherwise, have the method validated by your accountant, then check that your store applies it: depending on the platform, it may not.

What your store actually does

Your platform calculates the VAT on every order. Before you rely on the amount it shows, check what it does with delivery.

Shopify. For a store in the European Union, shipping is taxed automatically, regardless of the "Charge tax on shipping rates" setting. If you sell products at different rates, Shopify calculates shipping tax based on the proportion of each VAT rate in the order, which amounts to a pro rata split. The rate shown on delivery can then look odd, neither 5.5% nor 20% for example: that is expected.

WooCommerce. Three settings matter:

• The shipping tax class, in the tax options. By default, it is based on cart items: as soon as the order contains a standard-rated item, all of the delivery is taxed at the standard rate, even if the basket also contains a book. That is not a pro rata split: have this choice validated by your accountant, or configure the store differently.
• The "Shipping" box on each tax rate, which says whether that rate also applies to delivery charges.
• The tax status of each shipping method, such as flat rate, which decides whether its cost is taxed.

On every platform, the safest check is to place a test order with a mixed basket and look at the VAT breakdown on the invoice.

"I'm only passing the carrier's cost on"

A common confusion: delivery is passed on at the price the carrier charged you, with no margin, so it would be a simple pass-through, with no VAT.

It is not. To fall outside VAT, an amount passed on must have been paid in the name and on behalf of your customer, and recorded in a suspense account in your books: that is a disbursement, and the conditions are strict. But you create the label, with your own carrier account, and the carrier sends its invoice to you. The transport is bought in your name: when you charge it to your customer, it is part of the price of your sale and follows the VAT of the product, even passed on to the cent.

The same goes if your carrier's invoice carries no VAT, which happens for an export shipment or for some exempt postal services. What the carrier charges you changes nothing about what you charge your customer.

Free shipping

If you offer free delivery, there is no delivery line on the invoice, so nothing to split: VAT applies to the price your customer actually pays. The transport cost remains a business expense, and the VAT your carrier invoices you remains deductible.

The real question with free shipping is not tax, it is your margin. We covered it in Offering free shipping without losing money, with a free shipping threshold calculator.

A return and a refund

When a customer sends their order back and you also refund the delivery charge, the taxable amount is reduced accordingly. Your credit note must therefore include the VAT on the refunded delivery charge, at the same rate as on the original invoice, not only the VAT on the product. If you do not refund delivery, its VAT remains due.

Return transport, if you pay for it, is a business expense: the VAT your carrier invoices you is deductible, as for the outbound shipment.

The form of the credit note and the deadline for adjusting VAT are set by your country's rules: check them with your accountant.

Selling to consumers elsewhere in the EU

Since 1 July 2021, a single threshold applies across the Union: EUR 10,000 excluding VAT per year, combining all your sales to consumers in other EU countries.

• Below the threshold, this year and last year, you apply your own country's VAT, as for a domestic customer, delivery included.
• Above it, you apply the rate of the customer's country, to the product and to delivery alike. The switch happens with the sale that crosses the threshold, not on the following 1 January.

An example for a seller based in France shipping to Lisbon, for an item at €40 excluding VAT and €5 delivery excluding VAT, so €45 excluding VAT:

• Below the threshold: French VAT at 20%, so €9.00.
• Above the threshold: Portuguese VAT at 23%, so €10.35.

Note that it is not only the standard rate that changes: it is the rate the customer's country applies to that product. A book at 5.5% in France is at 6% in Portugal, and so is its delivery.

To avoid registering in every country, you declare and pay this foreign VAT through the One-Stop Shop (OSS), from the tax portal of your own country, with one return per quarter. You can also choose to apply the customer's country's rate from the first euro, without waiting for the threshold: the option then commits you for at least two calendar years.

Selling to businesses elsewhere in the EU

When a business customer registered for VAT in another EU country orders from your store, the sale is exempt in your country, delivery included: the customer accounts for the VAT in their own country. Check their number on VIES, show both VAT numbers on the invoice with a reference to the exemption (the Directive accepts a reference to its own Article 138, to the corresponding national provision or to any other mention that the supply is exempt), and declare the sale in your recapitulative statement of intra-Community supplies: without it, the exemption can be challenged.

Selling outside the EU

An order shipped outside the European Union, to Switzerland, the United Kingdom or the United States, is exempt from VAT in your country, and the delivery charges invoiced to the customer are exempt too, since they are part of the price. Keep proof that the goods actually left the EU: that is what justifies the exemption. The documents to keep depend on how you ship: your accountant will tell you which ones.

On the purchase side, your carrier's invoice for an export shipment often arrives without VAT, which is normal: transport directly connected with an export is itself exempt.

On arrival, your customer's country may charge its own import VAT, and customs duties. Who pays them depends on the Incoterm you choose: see DDP or DAP: who pays the import duties on your parcels, which also covers the United Kingdom, where the seller must charge UK VAT itself up to £135.

On the accounting side: recovering VAT on transport

The transport you buy is a business expense. The VAT your carrier invoices you is deductible, provided you hold an invoice in your business's name.

That is where the carrier account matters. When you ship with your own account, the carrier invoices you directly, in your name, and every invoice matches your shipments. We explain how to open one in Opening a carrier business account when you sell online.

Before you send your invoices, check

• Delivery charges invoiced to the customer are subject to VAT, at the rate of the product.
• If the basket mixes several rates, the split follows a single method, validated by your accountant.
• Your store actually applies that method: one test order with a mixed basket is enough to see it.
• You track the total of your sales to consumers in other EU countries, to know when you cross EUR 10,000.
• For a business in another EU country: VAT number checked on VIES, exemption reference on the invoice, recapitulative statement.
• For exports: proof that the goods left the EU kept with the invoice.
• For a return where delivery is refunded: the credit note also covers the VAT on delivery.

This list is a reminder, not tax advice. Go through it with your accountant, who knows your situation and can adapt it to your case.

With ParcelRush, you ship with your own carrier contracts: each carrier invoices you directly, in your name, with no intermediary reinvoicing the transport. The VAT on your shipping costs is therefore recovered from the carrier's own invoices. ParcelRush does not replace your invoicing software or your accountant: the VAT on your sales is still calculated by your store, under your responsibility.

Sources

• Council Directive 2006/112/EC on the common system of value added tax, consolidated version of 1 January 2025, EUR-Lex: Articles 33 (place of distance sales), 59c (EUR 10,000 threshold and two-year option), 78 and 79 (incidental expenses and disbursements), 90 (reduction of the taxable amount after a return), 132 (postal exemption), 138 (intra-Community supplies and recapitulative statement), 146 (exports and related transport), 168 and 178 (right of deduction and invoice), 226 (invoice details, including the exemption reference).
• Directive 98/6/EC on the indication of the prices of products, EUR-Lex, Article 2: the selling price includes VAT and all other taxes.
• VAT rates applied in the EU, Your Europe, European Commission: French rates (20%, 10%, 5.5%, 2.1%) and Portuguese rates (23%, 13%, 6%).
• Cross-border VAT, Your Europe, European Commission: the EUR 10,000 threshold for distance sales.
• One-Stop Shop, European Commission: how the OSS works and the quarterly return.
• VIES, European Commission, to check an EU VAT number.
• Shipping tax, Shopify Help Center: shipping taxed automatically in the EU, split by the proportion of each VAT rate in the order.
• Setting up taxes in WooCommerce, WooCommerce documentation: shipping tax class and priority given to the standard rate.
• Flat rate shipping, WooCommerce documentation: tax status of the flat rate shipping method.
• Binding information 28748, Portuguese Tax and Customs Authority, 30 September 2025: books are subject to the 6% reduced rate (List I annexed to the Portuguese VAT Code, item 2.1).