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.
38

Hi @xbyx ,

I do not have an update to provide, nor do I have any sort of timeframe on when a change may be made. I know that this issue is with the relevant internal team and if I hear any updates on this matter, I will be sure to share it here as soon as I do.

Kind regards,

Victor | Shopify Social Care