How to handle VAT on gift cards under new EU regulations?

Accounting & Taxes

Topic summary

EU-based merchants face a critical VAT compliance issue with Shopify’s gift card system that remains unresolved since 2019.

The Core Problem:

  • Under EU regulations effective since 2019, single-purpose vouchers (gift cards usable only on one website for products with known VAT rates) must be taxed at point of sale
  • Shopify treats gift cards solely as payment methods, not taxable products
  • This creates double taxation: merchants must pay VAT when selling the card AND again when it’s redeemed
  • The platform doesn’t allow enabling the “charge taxes” option on gift card products

Shopify’s Position:

  • Support staff (Victor_5) initially argued Shopify gift cards qualify as multi-purpose vouchers (exempt from upfront VAT) because they can be used for any product and shipping addresses aren’t predetermined
  • However, this interpretation is disputed by merchants’ accountants, particularly for stores selling only physical goods at uniform VAT rates

Current Status:

  • No solution implemented after 5 years despite repeated escalations
  • Merchants report being unable to legally sell gift cards, especially problematic during Christmas season
  • Suggested workarounds (discount codes, third-party apps like Rise) don’t fully replicate gift card functionality
  • Growing frustration among EU merchants who feel ignored by Shopify

Impact:
EU merchants face potential tax evasion accusations or must completely discontinue gift card sales.

Summarized with AI on November 4. AI used: claude-sonnet-4-5-20250929.
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@Victor_5 I’ve also checked the Rise app, it does allow for VAT (tax) to be charged but it WILL also charge tax when the client redeems the gift card. Which means taxes are charged twice over the same sum.

In other words: Rise does nothing to solve the issue.

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