1/14/2025

Collecting Tax & Resident IDs for International Orders in Shopify

As an eCommerce entrepreneur, you may find yourself expanding into the international markets, and let me tell you, it’s not as simple as just flipping a switch. One of the crucial elements to understand is the importance of collecting Taxes & Resident IDs when handling International Orders on your Shopify store. This blog will dive deep into why & how to do this correctly, ensuring that you’re compliant & avoiding some nasty surprises down the line.

Understanding International Tax Compliance

When you sell products to customers in foreign countries, you’re not just sending a package; you’re entering a world of regulations that can significantly impact your business. According to Shopify, businesses are responsible for understanding the tax requirements necessitated by each country they sell to. This often includes charging VAT or other import duties, which vary by country.

Why is Tax Collection Important?

Legal Compliance: Every country has its own tax laws, & failing to adhere to these could put your business at risk. You could face fines or even cease trading in specific markets.
Customer Satisfaction: Unexpected fees or delays in delivery due to tax issues can frustrate your customers. By being transparent and upfront about taxes, you can improve customer trust and satisfaction.
Streamlined Operations: Having a solid understanding of taxes eliminates confusion among your team members & ensures that everything runs smoothly when fulfilling international orders.

Types of Taxes to Consider

When selling internationally, here are a few tax types you might come across:

Import VAT: This applies to goods entering a country from abroad. In the EU, for example, products valued under €150 are typically subject to VAT, which you might need to collect from buyers.
Sales Tax: If you have a physical presence or substantial sales in a country, you might be required to collect sales tax from customers in that region.
Customs Duties: These are fees imposed by the government for imported goods. They can vary widely depending on the product category & country.

Roles of Resident IDs in International Orders

In certain countries, customers are required to provide Resident ID numbers during the checkout process when purchasing products. This is particularly common in places like China & South Korea, for example.

What is a Resident ID?

A Resident ID is an identifying number that confirms a customer's identity & residency in a specific country. In many cases, it’s mandatory for compliance reasons, particularly for tax purposes.

Why Collect Resident IDs?

Tax Regulations: Some countries mandate this information for tax compliance. In Shopify, it describes that failing to collect correct taxpayer information could result in your packages being held up or returned.
Customs Clearance: When sending products internationally, customs authorities may require a Resident ID to validate the identity of the customer & ensure that the tax obligations are met.
Improved Security: This step enhances security measures in transactions, helping to prevent fraud which is a growing concern in international shipping.

How to Collect Tax & Resident IDs

Setting Up Your Shopify Store for International Sales

Step 1: Activate Duties & Import Tax Collection

To collect taxes on international orders, you will need to activate the Duties & Import Tax collection feature in your Shopify store. According to Shopify’s Duties and Import Taxes guide, this is a crucial step.

Requirements for this feature include:

A Shopify Plus or Advanced Shopify plan.
Use of Shopify's own shipping services, as third-party apps or different fulfillment networks may not support this feature.
Ensuring your products have Harmonized System (HS) codes, which categorize your products for customs purposes.

Step 2: Decide on Shipping Methods & Taxes

You must assess your shipping methods. Some carriers handle import taxes while others may require you to pay them upfront or at delivery. Using Duties Paid strategies ensures customers are aware of their tax obligations when they order.

Step 3: Implement Additional Checkout Fields

Based on your target audience, you may need to add custom fields to checkout for collecting Resident IDs. Depending on the country or region, info such as the CPF in Brazil or Resident Identity Card number in China may be needed. This can be done by modifying the checkout settings.

Adding Custom Fields to Collect Resident IDs

When setting up Shopify, ensure to implement additional checkout fields. You can do this following the guidelines in the Shopify Help Center that clarify how to configure necessary fields. Here’s a rough outline:

Add Mandatory Fields: For instance, in places like China, you need to require resident ID numbers. Your aim is to ensure compliance with local laws & regulations ensuring smooth customer deliveries.
Integration with an App: If necessary, consider employing a third-party app to help customize your checkout forms for collecting Resident IDs.

Final Thoughts: Managing Your International Business More Effectively

Selling internationally involves navigating an ocean of tax regulations, compliance obligations, & various customs laws. But with the right steps, you can mitigate risks while capitalizing on new markets hinting at significant growth.

As part of your strategy to engage customers & streamline operations, consider using a tool like Arsturn. This platform allows you to build a custom AI Chatbot that can assist with FAQs regarding shipping and taxes, enhancing the customer journey. It's easy to use, requires no coding skills, and is a fantastic way to offer interactive support on your website.

By refining your tax collection processes & integrating tools like Arsturn, you can ensure a seamless purchasing experience for your international customers while complying with local laws. Remember, they are not just numbers; those IDs affect your bottom line! So, let’s make sure you’re collecting those Taxes & Resident IDs correctly!