Set it up like this:
1. Create Subdomains:
for EU Member countries, those would be:
AT, BE, BG, CY, CZ, DE, DK, EE, ES, FI, FR, GB, GR, HR, HU, IE, IT, LT, LU, LV, MT, NL, PL, PT, RO, SE, SI, SK
Example: shop-at.mydomain.com
The landing page can be anything, but since this wont be used - we created a blank page.
2. Create VAT Codes:
For EU Member countries, those would be:
AT, BE, BG, CY, CZ, DE, DK, EE, ES, FI, FR, GB, GR, HR, HU, IE, IT, LT, LU, LV, MT, NL, PL, PT, RO, SE, SI, SK
We set the country from the dropdown (Note, these will only be available if the subdomain exist!) - then put VAT as Tax Code, because that's what it is.
3. Shipping options:
Set "Country of domain purchase is made from:" to the country where the goods are sent from, if your country doesn't have EUR as currency, choose a domain that has that as currency - like Finland.
Set the description to the country you are setting up the VAT code for, example, Austria.
Be sure to leave "Shop shipping option to:" as "All", so that people ordering from other countries still can order.
Set "Limit Delivery to Following Countries:" to the country you wan't this option to be for, in this example: Austria.
4. Edit the Shopping Cart Layout.
The the shipping options tag to: {tag_shippingoptions,true,false,AT;BE;BG;CY;CZ;DE;DK;EE;ES;FI;FR;GB;GR;HR;HU;IE;IT;LT;LU; LV;MT;NL;PL;PT;RO;SE;SI;SK;IS;NO}
In the above, we limit the countries we wan't to be able to ship to and add those outside of EU that we want to include.
In the Cart, it will looks like this now for example:
Destination country:
Austria
Choose shipping option:
Austria €10.50
Destination state:
VAT
With some javascript, you can monkeypatch the shipping option function to select shipping option and VAT automatically and hide them from the client.
Congrats, you are now charging VAT for EU countries.