Introduction
In 2025, Shopify makes it easier than ever to sell globally. But dropshipping across borders brings tax, shipping, and compliance risks that can crush profits if ignored.
Proven Tip:
Track where your buyers live, understand customs rules per country, and coordinate fulfillment to avoid blocked shipments and surprise taxes.
Proven Tip: Track Customs, Duties & Platform Reporting Per Country
Many new dropshippers start selling globally without realizing:
- Some countries charge import VAT/duties at the buyer’s doorstep
- Shopify and payment platforms may issue Form 1099-K or local equivalents
- Delivery delays and customs refusals can lead to chargebacks and returns
Use apps like Zonos, DHL Duty Calculator, and Easyship to estimate taxes and display the total landed cost to buyers before checkout.
IRC Tax Code Relevance
For U.S.-based sellers with international dropshipping orders, the following codes are especially important:
- IRC §162 – Deductible business expenses for international shipping and tools
- IRC §901 – Claim foreign tax credits if import VAT or withholding tax was not refundable
- IRC §988 – Currency exchange and reporting
- IRC §6001 – Recordkeeping for cross-border transactions
Relevant IRS Forms
| Form | Purpose |
|---|---|
| Form 1116 | Claim foreign tax credit for import VAT or other non-recoverable taxes |
| Form 1099-K | Reports gross receipts, including international sales |
| Schedule C / Form 1065 / 1120-S | Report foreign income from Shopify dropshipping |
| Form 8938 | Report foreign accounts, if dropshipping involves international bank or payment providers |
| Form 4562 | Deduct logistics tools or software used for fulfillment tracking |
Example: Seller Fixed Tax Issues in 3 Countries with Proper Setup
A streetwear brand based in New York used Shopify + CJ Dropshipping to serve Canada, UK, and Australia. They:
- Had frequent customs delays
- Lost customers due to unpaid duties at delivery
- Missed out on claiming import VAT credits
In 2025, they worked with a CPA to:
- Register for VAT in the UK
- Use DDP shipping for Australia
- Integrate Easyship for real-time tax and duty estimates at checkout
The result?
- Refunds dropped by 38%
- Conversion rates improved by 21%
- No tax notices from foreign agencies
Step-by-Step Guide to Dropshipping Internationally on Shopify in 2025
Step 1: Choose Fulfillment Partners with Global Support
AliExpress, CJ Dropshipping, Zendrop, or private suppliers with DDP (Delivered Duty Paid) options.
Step 2: Estimate Duties and Display Landed Cost
Use Easyship, Zonos, or Shopify Markets to calculate duties and taxes at checkout.
Step 3: Understand Tax Rules in Your Buyer’s Country
For example:
- UK requires VAT registration once you cross £70,000
- EU charges import VAT over €150
- Canada charges GST/HST for non-residents over a certain threshold
Step 4: Separate International Sales in Your Books
Track by country, including:
- Gross revenue
- Refunds
- Currency adjustments
- Taxes collected
Step 5: Reconcile Foreign Income with IRS Reporting
Report on Schedule C or Form 1120-S and claim Form 1116 credits where applicable.
Conclusion
Selling globally with dropshipping is profitable—but only when you get the tax and shipping side right. In 2025, customers expect clarity on duties and fast delivery. Stay ahead with smart tools and accurate records.
Call to Action
Going global with Shopify? Need help with VAT registration, shipping setup, or foreign income reporting?
Email Anshul Goyal, CPA EA FCA at anshul@kkca.io to protect your profit while scaling internationally.
Disclaimer
This blog is for educational purposes only. For legal, financial, or tax advice specific to your situation, consult a licensed CPA or attorney.
FAQs
1. Do I need to charge VAT or GST to international customers?
It depends on the buyer’s country and your sales volume. Many require registration after a threshold.
2. Can I deduct shipping and fulfillment platform fees?
Yes. These are ordinary business expenses under IRC §162.
3. What if a customer refuses to pay import tax?
You may lose the sale and absorb the cost. Use DDP shipping to avoid this.
4. Do I need a foreign bank account to dropship internationally?
No, but if you do use one, you may need to file Form 8938.
5. What if I use multiple currencies on Shopify?
Currency conversions must be tracked accurately. You may have IRC §988 reporting obligations.
About Our CPA
Anshul Goyal, CPA EA FCA, is a U.S.-licensed Certified Public Accountant, IRS Enrolled Agent, and international tax strategist. He helps Shopify dropshippers go global with confidence—managing VAT, foreign income, and platform compliance across borders.
Email anshul@kkca.io to discuss your global growth strategy.