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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Dear Victor,

Thanks for your reply.

What I meant, though, is that based on the new legislation we must pay VAT on the sale of a giftcard.

If, for example, we sell a giftcard with a face value of 100€ the end consumer will pay 100€ and we will have to pay about 18€ vat tax (22% on 100€/1,22).

When the customer comes back to the website and uses the giftcard we run the risk of paying VAT again on the same 100€ (thus ending up paying it twice) because at the moment a Gift Card is treated by Shopify as a payment method.

If there a solution to used the gift card as if it was a voucher, and therefore reduce the taxable amount in the cart, and not as a payment method?

The consumer experience is not what worries me because by selling products with a VAT included price list they wouldn’t notice anything, it’s us, the venor, that would end up paying VAT twice on those, for example, 100€…

I guess the solution is either find a way to treat a gift card like a voucher when they are used on find a solution to sell vouchers as if they where products.

Any suggestion?

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