How do different currencies work on Shopify?

Shopify's currency system is based on a single primary currency and multiple display currencies. The store's primary currency serves as the basis for all pricing, while display currencies are the currency options that customers see. The multi-currency system is built to work automatically through the Shopify admin.

When a customer visits your online store, Shopify recognizes their location and automatically displays prices in their local currency. This feature significantly improves the customer experience, as shoppers see prices in a familiar way without having to calculate exchange rates themselves. Customers can also manually convert currencies from your online store interface.

The basic regulations on international trade define:

• Default currency of the transaction (primary currency)
• Currencies to display (options offered to customers)
• Currency rounding rules (e.g. prices ending in .99 or .95)
• Exchange rate update settings

Shopify's currency capabilities allow you to expand your sales to international markets without complicated technical solutions or setting up separate online stores for different countries.

How do you enable multiple currencies in your Shopify store?

Enabling multiple currencies in Shopify is a simple process through your dashboard. To get started, go to Settings > Payments in your Shopify dashboard, where you'll find your currency settings. First, make sure you're using Shopify Payments, as it's a prerequisite for multicurrency functionality.

Also, make sure your theme supports currency conversion. Most newer Shopify themes include a currency conversion tool, but older themes may require minor customization. The menu location can usually be set in the theme settings or by editing the theme code.

How are currency rates updated in Shopify?

Shopify's currency rates are automatically updated once a day based on market rates. The update usually occurs at midnight Eastern Time (ET). The rates are based on interbank rates that Shopify obtains from trusted financial service providers.

An automatic update system ensures that your online store's prices stay up-to-date without manual work. Exchange rate changes are immediately reflected in all your products, saving time and reducing the chance of errors.

Using custom rates can be useful if you want to add a small margin to your rates to cover currency conversion costs or if you want to round prices to make them more marketing-friendly. However, be aware that too much deviation from market rates can create distrust among customers who may check the rates themselves.

What should be considered in the taxation and reporting of multi-currency trade?

Taxation and reporting require special attention when running a multi-currency store. When you sell products in multiple currencies, it's important to understand that accounting is always done in the store's primary currency. Shopify automatically converts all transactions to the primary currency for reporting.

Taxation practices vary by country of sale. Within the EU, the VAT rate of the destination country applies when you exceed the country-specific sales thresholds. Shopify Payments lets you automatically calculate and charge the correct VAT based on the customer's country of location.

To track multi-currency sales, Shopify offers several reporting tools:

• Financial reports: Show sales converted to primary currency
• Sales Reports: Breakdown sales in different currencies
• Tax reports: Help with VAT returns for different countries

Please note that currency fluctuations may cause slight differences between actual sales and accounting. This is because the exchange rate shown to the customer may differ slightly from the exchange rate at the time of payment processing. We recommend that you discuss best practices with your accountant for handling exchange rate differences.

When it comes to international online shopping, it's also important to take care of country-specific tax registrations and declarations. Shopify's tools make it easy to collect information, but the ultimate responsibility for fulfilling tax obligations always lies with the merchant themselves.