We want to add gift cards to our EU based e-commerce website.
According to the new EU VAT regulation our gift cards would fall in the Single Purpose Voucher (because at the moment of the sale we know it will be used only on our website and only for products that are subject to 22% VAT) and would therefore need to be taxed for VAT at the moment in which the card is sold.
In order to avoid paying taxes twice, when the card is sold and then again when the product is sold, we would have to find a way to deduct the value of the card from the taxable amount of the product purchase (as if it was a voucher) rather than consider it a method of payment.
Has anybody else had the same issue? How did you deal with it? Ideas/Suggestions?
I already talked several times with the German Shopify support and posted this topic in the German forum.
This topic is quite urgent to most merchants in Germany (and maybe other European countries) as Christmas time is coming up.
There is no useful workaround and we can currently not sell vouchers at all. I have tried overriding categories with tax regulations as suggested by the Germany shopify Support, but they have apparently not tested it themselves, as Shopify doesnt allow to override gift cards or categories including the gift cards.
Is this topic in the technical Roadmap already?
Many thanks for your understanding,
I chatted to the Shopify support today, but they also mainly suggest overriding the gift card settings or using an app. They sent the issue to their tax team and will hopefully get back to me soon. I will keep you updated!
In my understanding you can still offer gift cards to your customers.
It's true that Shopify doesn't do proper tax calculation for EU which is, well, ridiculous.
That being said if you inform your accountant about it, they can do the necessary corrections in your books.
To use Teoalessi listed questions:
1) The seller has to pay sales tax on a single use gift card
-> You export all revenue coming from gift cards and note the VAT due in your books
Reports - Sales - Sales by product - Filter on Product type your gift card name
2) The seller wants to avoid paying it again when the card is used
-> You export all payments where gift cards where used as Payment method and list this.
Reports - Finances summary - Payment by Type
3) what can the seller do to achieve this?
Give both exports to your accountant and let them to do their magic so you don't pay too much taxes.
At least that is my understanding, do check this with your accountant and let me know if they suggest differently. If your accountant confirms it, let me know so I'll be more certain about it as well ;).
*Edited to clarify
This inacceptable that after 2 years, there is still no solution to this problem.
Please escalate this problem higher up the ladder!
Ignoring all your EU customer is just not ok.
Apparently this still hasn't been fixed? Fortunately we have products with different VAT %s so if I understand correctly, it can be viewed as a multi-purpose voucher.
Another question though is what happens when the gift card expires? If we don't charge VAT on purchase but still receive the money but the customer doesn't redeem the gift card we still need to pay taxes for the money we received. I tried to look into this but found no clear answer on what happens on gift card expiration.
I'm not sure if this will help with the issue. But to clarify since the issue is possibly paying tax on Gift Card sale and the Product redeemed and as of the moment it is not possible to use Gift Card to remove the tax on the product redeemed is it okay to just discount the gift card value when they purchase it?
For example: Customer purchase a gift card 100 they will only pay 78( 100 - 22% VAT).
Once they use this Gift card and purchase a product worth 100 then the tax is applied to that purchase.
Just throwing out suggestions here, hope this helps for now while waiting for Shopify resolve the issue.
If you need dev or admin work you can contact us https://bit.ly/36CgHKQ.
This is what I am thinking... my store only sells a single product but if I ship to an EU country then no UK VAT is due. That means that a gift voucher is technically multi purpose as my customer might choose to ship their order outside the UK (I think I have understood this correctly). That means I will apply VAT (or not) on the eventual sale rather than on the gift voucher.
If you don't ship outside the UK then perhaps as workaround you could allow shipping to a non UK place that you are happy to ship to (Channel Islands?) or to a country with a low likelihood of ordering (Vatican State?). That would then allow you to justify voucher a multi purpose rather than single purpose and would likely have no extra book-keeping.
Please note that I am not an accountant, nor have I had accountancy advice on this!
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