What does it mean to shops that Amazon and other e-merchants also sell in Denmark?
VAT: Treatment of gift cards
Is your business aware of the new VAT treatment of gift cards?
Starting July 1st 2019, a new legislation regarding the charging of VAT on gift cards becomes effective.
The new VAT rules
According to the new VAT rules, the VAT should be charged when the sale of a gift card is made. This means that the purchase of a gift card henceforward will be juxtaposed with the purchase of a regular good. When the customer cashes a gift card, the included VAT will be deducted the VAT of the products the customer wishes to buy. Therefore, the use of a gift card can be compared with the return of a product where the price of the product and the included VAT becomes deducted in the new products the customer buys.
The old VAT rules
During the old VAT rules, the VAT wasn't calculated when buying a gift card. Instead, the VAT was calculated when the gift card was cashed. In other words, when a customer purchased a 100 DKK gift card, the VAT wouldn't be derived from the 100 DKK - the VAT was first calculated in the second, the customer cashed the gift card and "exchanged" it to a product.
Exceptions to the new rules
With all-new rules come exceptions which is also the case with the new VAT rules for gift cards. You are expected the new VAT rules if you sell gift cards that can be cashed across national frontiers or gift cards that can be used to buy products with differentiated VAT such as stamps, insurances or newspapers. If so, you can keep on using the old VAT rules.
How can we help you?
Here at Ka-ching, we want to make the life of our customers as easy as possible. Therefore, our gift card service takes into account both the old and the new VAT rules. Furthermore, our service ensures that the use of gift cards, whether you use the old or the new VAT rules, is registered correctly in accounting.
Do you want to know more about the new VAT rules?
Thomas Damgren, CSO