SHOPIFY INC

15. Income Taxes

The Company's recovery of, or provision for, income taxes is determined by applying the estimated annual effective tax rate to income or loss from recurring operations and adding the effects of any discrete income tax items specific to the period.

The Company updates its estimate of the annual effective tax rate each quarter and makes cumulative adjustments if its estimated annual tax rate changes. The Company’s effective tax rate may be subject to fluctuation during the year as new information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such as the mix of forecasted pre-tax earnings in the various jurisdictions in which the Company operates, valuation allowances against deferred tax assets, the recognition and derecognition of tax benefits related to uncertain tax positions and changes in or the interpretation of tax laws in jurisdictions where the Company conducts business.

The Company had a recovery of income taxes of $88 million in the three months ended March 31, 2025 primarily as a result of unrealized loss on equity and other investments, partially offset by earnings in jurisdictions predominantly outside of North America.

The Company had a provision for income taxes of $17 million in the three months ended March 31, 2024 primarily on account of earnings in jurisdictions outside of North America.