Gift cards and Taxes
Gift cards not only offer a powerful way to build customer loyalty and boost revenue, they also open up valuable tax planning opportunities for businesses. The right gift card strategy creates liquidity benefits, deferred tax liabilities and additional revenue, which have a direct impact on financial stability.
FEATURE CLUSTER
Immediate liquidity, without immediate service provision
- When gift cards are sold, the money flows in immediately, whilst the service is provided later or not at all.
- This gives companies an interest-free loan that they can use directly for investments, marketing or running costs.
- Unredeemed gift cards (‘breakage’) further increase revenue.
Tax benefits through single-purpose and multi-purpose gift cards
- Whilst VAT is payable immediately on regular sales, there are clear tax differences when it comes to gift cards.
- Single-purpose gift cards: VAT is payable upon sale.
- Multi-purpose gift cards: VAT is only payable upon redemption.
- Multi-purpose gift cards in particular create a significant liquidity advantage, as companies can pre-finance the amounts received tax-free.
Revenue optimisation through breakage & flexible redemption
- Higher revenue from unredeemed giftcards
- If giftcards are not redeemed, the full amount remains as revenue within the company.
- Multi-purpose giftcards also offer flexibility in redemption – ideal for hotels, restaurants, sports providers and e-commerce businesses that combine different tax rates.
Tax-efficient. Economically sound. Predictable in effect.
- Gift cards are a strategic financial tool: they increase liquidity, defer tax liabilities, provide planning certainty and boost revenue.
- With a professional gift card infrastructure, these benefits can be harnessed effectively, across all sectors and without additional effort.
EXAMPLE CALCULATION
A hotel or sports club sells 1,000 gift cards at €100 each = €100,000 in immediate liquidity. As these are multi-purpose gift cards, VAT is only payable upon redemption. Unredeemed gift cards further increase revenue.
Take advantage of the tax benefits of a professional gift card system.
We’ll show you how to boost liquidity, defer tax liability and increase revenue.