SHOPIFY INC.

12. Income Taxes

The Company's provision for income taxes is determined by applying the estimated annual effective tax rate to income or loss from recurring operations and adjusting for 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 is expected to change. 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, any valuation allowance 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 provision for income taxes of $273 million and $220 million in the three and six months ended June 30, 2026, respectively, as a result of earnings in various jurisdictions and unrealized gain on equity and other investments.

The Company had a provision for income taxes of $173 million in the three months ended June 30, 2025, as a result of unrealized gain on equity and other investments and on account of earnings in various jurisdictions.

The Company had a provision for income taxes of $85 million in the six months ended June 30, 2025, as a result of earnings in various jurisdictions, partially offset by unrealized loss on equity and other investments.

We continue to be subject to review and audit by tax authorities around the world, which may lead to adjustments to our tax liabilities. In 2025, we received a proposed assessment from the Canada Revenue Agency ("CRA") related to our transfer pricing for tax year 2020. We disagree with the proposed assessment and intend to defend our position.

While we believe that our tax position is appropriate, the final determination and timing of resolution of the above matter, and any other tax audits or litigation cannot be predicted with certainty. We continue to monitor the progress of tax audits with tax authorities. Adjustments arising from tax audits or litigation will be recorded in the period in which such matters are resolved.