Black Friday Deals Trigger Complex Value-Added Tax Calculations

Black Friday fills stores and websites with gift cards, promotional codes, and big discounts. But for value-added tax, the difference between a voucher and a discount isn’t just in the wording—each changes when the VAT is due, and how much is owed.

A “50% off everything” ad looks simple to a shopper. Behind the scenes, it can be a minefield for tax accountants. What matters for VAT is how the deal is structured, not what it’s called.

Here’s how the rules work, and why small details make a big difference.

Two Voucher Purposes

Since 2019, the EU VAT Directive has drawn a firm line between two types of vouchers: single-purpose and multi-purpose. This difference determines when VAT is paid, which in turn affects cash flow.

A single-purpose voucher is one where the VAT rate and place of supply are already known when it’s issued. Because everything needed to calculate VAT is clear, tax is due right away when the voucher is sold. The sale of the voucher itself is treated as the sale of the goods or services it represents. Even if the customer never uses the voucher, VAT must be accounted for.

Here’s a simple example. A customer buys a book voucher for 119 euros as a gift from a bookstore. That sale triggers VAT immediately. The bookstore must treat it as if the book has already been sold for VAT purposes. If the VAT rate on books is 10%, the store must include 10.82 euros (the VAT portion of 119 euros) in its next VAT return, even though no book has actually been handed over yet.

A multi-purpose voucher works differently. It covers goods or services that may have different VAT rates or might be sold in different countries. Because the tax rate and place of supply aren’t known at the time of sale, the initial sale of the multi-purpose voucher isn’t subject to VAT. Tax is due only when the voucher is redeemed for specific goods or services. If the customer never redeems it, there’s no VAT to pay.

Take the example of a customer buying a 100-euro gift card from a large department store, At that point, no VAT is due. The card is simply a payment instrument. Later, the recipient uses it to buy a pair of headphones priced at 80 euros, VAT included. Now the retailer knows what’s being sold, where, and at what rate. If the VAT rate on electronics is 21%, the store must remit 13.88 euros in VAT on that sale. The remaining 20 euros balance on the card stays untaxed until it’s used.

Digital Payments

Many retailers now offer app-based wallets or online accounts where customers can set aside money for future shopping. These balances can be treated as either vouchers or prepayments. While there are legal nuances between the two, the good news is that prepayments follow the same logic as vouchers.

The key question is simple: Are the details of the purchase already known?

If the payment relates to a specific item, VAT applies immediately. For example, if a consumer pays 500 euros upfront for a made-to-order sofa, all the details are clear—the product, the VAT rate, and the place of supply. Because everything is known, VAT is due on that 500 euros as soon as the customer pays it. It’s treated the same way as a single-purpose voucher.

If the payment is general credit—say an individual adds 100 euros to their store account without choosing what to buy—that’s different. They haven’t bought a product yet, and the retailer doesn’t know what they’ll use the money for. In that case, it works like a multi-purpose voucher. VAT isn’t due until the customer spends the money on a specific item or service.

VAT on Discounts

The basic rule sounds simple: VAT applies to everything the seller receives as payment. In practice, though, retail promotions make that rule much harder to apply.

When a retailer bears the cost of the discount, the price gets reduced and the amount that is subject to tax drops. VAT is charged only on the amount the seller actually receives from the customer.

But if someone else funds the discount, the outcome changes. For example, a manufacturer reimburses a retailer to cut the shelf price. The retailer still receives the same total amount—part from the customer, part from the supplier—so the VAT base stays at the full price.

Another example: A cosmetics brand pays a store to offer “10 euros off Brand X.” The customer buys the product for 40 euros instead of 50, and later the brand pays the retailer 10 euros. In total, the retailer receives 50 euros. For VAT, that’s the full consideration received. Tax must be calculated on the full 50 euros, not just the 40 euros the shopper paid.

This rule reflects the core idea behind VAT—tax applies to everything of value received for a sale, no matter who pays it. That’s why it’s so important to understand who funds the discount. Marketing teams may blur this line, but tax law doesn’t.

Multi-buy promotions add another layer of complexity. Offers like “three for two” or “buy one, get one free” don’t mean that one item is sold at a 100% discount. The total price must be spread across all the items, even those that appear free. The amount paid by the customer represents the full consideration for the sale.

If the goods fall under different VAT rates, the discount must be divided proportionally to keep the calculation accurate.

So it’s clear that VAT, unlike retail marketing, is indifferent to the excitement of Black Friday. Its logic rests on definitions, not slogans. Whether a customer redeems a gift card, enjoys a 50% discount, or picks up a “free” bundle, the correct VAT treatment depends on knowing where the line lies among a voucher, a discount, and a supply.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Aleksandra Bal is global tax technology lead at Stripe and a frequent contributor to tax publications and industry conferences.

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