Comprehensive Guide to Amazon UK & EU VAT for Sellers in 2024
Table of Contents
- A Few Thoughts on Amazon Seller VAT
- What is Amazon Seller VAT (Value Added Tax)?
- European Storage Options for International Amazon Sellers
- Filing and VAT Registration as an Amazon Seller
- Filing Your Amazon UK and EU VAT
- Using Amazon Reports to File Amazon VAT
- Europe VAT Import Tax vs Profit Calculations
- EORI Numbers
- Final Thoughts on Amazon EU VAT
If you're considering expanding your Amazon operations into the European market, you have probably heard of Amazon VAT (Amazon Value Added Tax). Chances are you're confused and concerned over VAT obligations and how they will affect your bottom line. VAT may seem a little complicated to newcomers in these markets, but they aren't as complex as you think and shouldn't stand between you and your growth opportunities! Let's look at Amazon VAT and how it would impact your sales.
(image by pressfoto on freepik)
A Few Thoughts on Amazon Seller VAT
Before we get started, here are a few thoughts to keep in mind when you are exploring expanding your Amazon business seller account into the European market:
- VAT is a legal requirement when selling in Europe. You can't avoid or ignore it.
- Start smaller, sell in only one country, to familiarize yourself with VAT.
- You will need extra administrative work when selling to European customers.
- Amazon tools, such as taxomate and Amazon accountants are available to help and can save you a lot of headaches, time, and errors.
What is Amazon Seller VAT (Value Added Tax)?
VAT, or Value Added Tax, is a tax that consumers must pay in Europe and is collected by the sellers. When someone purchases something, the total price they pay will automatically be vat charged. In America, for instance, someone will buy something for $4, plus tax. European consumers would pay $4.80 if the VAT were 20%. The VAT that Amazon will collect vary according to the country. The UK has a VAT set at 20%, while Germany's is 19%. Here is the full list of European countries and their VAT standard rates. As an Amazon seller, this affects you because your total sales prices will need to constitute tax like VAT. You will receive a separate tax bill for all incurred VATS.
Calculating Amazon VAT
VAT computations follow a simple formula:
- All costs of production and shipping, including Amazon fees.
- Your profit margin is added to production costs (now your Net Sales Price).
- Find the percentage of VAT required by your country of sale, and multiply it by your Net Sales Price.
- Add the above calculation to your Net Sales Price for your Final Selling Price.
Reminder: Your final sales price through Amazon Seller Central should include the VAT; make sure to add it to your profit calculations.
(image from freepik)
Will VAT Lower My Profit Margins?
VAT collected will never reduce your profit margin if you make sure to set it to include the tax. It is important to consider VAT costs when conducting product research in addition to products with low, competitive rates and high demand. Remember that Amazon VAT costs are calculated from your Net Price and not your final selling price. If you already have your final selling price and need to know how much tax needs to be added, work backward using this handy VAT calculator.
VAT Registration
There are two circumstances in which you will need to apply for a VAT registration number.
- First Day in Europe: Once your inventory reaches Europe, you must have a VAT number.
- Exceeded Distance Selling Threshold: For Amazon Germany sales (for instance), you can fulfill your orders by sending products from a UK warehouse using your UK VAT number. Once you reach a limit of 100,000 euros, you must register for your German VAT number.
Amazon sellers have two ways to get their VAT numbers:
- Through a representative or a fiscal agent: This is recommended if you have a company in the United States and if you are an international seller. This gives you your required number and allows a representative to guide you through the process.
- Establishing a European business or company: This method is often problematic and doesn't offer any advantages.
European Storage Options for International Amazon Sellers
There are several ways to operate your FBA business in Europe. Here are three of the simpler, more streamlined models:
European Fulfilment Network (EFN)
EFNs are usually the easiest way to get started. Here are some of the advantages of EFN:
- It only requires registering for a VAT number in the countries where you store inventory.
- Allows you to store all of your stock in one country.
- Can sell to other marketplaces (within a certain distance).
- While it is the easiest to set up, EFN FBA Fees are generally higher, and delivery times are greater than Pan-EU's.
Central European FBA (CEE)
- For German markets, but allows you to store inventory in Poland, the Czech Republic, and German warehouses.
- While these have faster delivery times and lower shipping costs than EFNs, CEEs require VAT numbers for all three countries.
PAN-European FBA
Pan-European FBA offers great potential and has the fastest delivery times and lowest shipping costs. Here are some of the advantages of using Pan-EU FBA:
- Easier to meet customer demand since Amazon stocks inventory due to strategic locations throughout Europe.
- Faster delivery and local customer service from Amazon.
- Lower FBA Fees: Amazon sends your inventory throughout Europe at no extra cost.
- Reach more customers.
Pan-European VAT registration can be quite complicated. You are required to register for VAT and comply with the rules set in seven EU countries, submit VAT returns throughout the financial calendar, and communicate with the applicable tax departments in their respective languages.
Generally, the best EU storage option for new sellers is to start with an EFN and CEE to cover all of the UK and German locations. As your sales increase, you can move to the Pan-European method.
Filing and VAT Registration as an Amazon Seller
The two biggest things to remember about registering for VAT are you will need a separate registration for each company and that you will need to file VAT returns routinely.
Amazon VAT Registration:
When registering for a VAT, you will need to present the necessary paperwork, including a passport, business documents, and administrative paperwork. While receiving your government-issued VAT number can take two months, you can begin selling your products immediately using your validity date.
Amazon VAT Returns:
VAT returns are due during different time frames, depending on the country. Germany, for instance, requires monthly returns, while the UK is quarterly. You generally have two weeks to pay before penalties are assessed. Once you submit the VAT return, you will receive confirmation and pay the bill using a bank transfer.
Even though VAT registrations and returns are not complicated, it may be advisable to leave the process to professionals to save time, paperwork, and costly errors.
Filing Your Amazon UK and EU VAT
You have three options for filing Amazon EU VAT registration:
Outsourcing:
Outsourcing may be costlier, but it will ensure that the VAT is filed accurately. Don't rely on freelancers or VA's for this step; hire service providers and accountants with expertise in Amazon Seller VAT. Many business owners prefer to outsource their VAT filing to save themselves a lot of trouble and time and avoid errors.
Self-filing:
This method may seem to save money, but if you make mistakes, you could be penalized. It is a very time-consuming process with a lot of room for errors.
Amazon VAT Services:
While this method also seems to be a money saver, it has drawbacks and may not be the best overall value. You can leverage your Amazon accounts to file your VAT, but you must provide Amazon with all your sourcing information and many sellers are reluctant to do this.
Using Amazon Reports to File Amazon VAT
Amazon generates monthly sales reports that include all sales data, including data you will need for your VAT returns. These reports can be given to your accountant so they can file VAT for your business.
The reports are available in Amazon Seller Central under "Reports > Fulfilment By Amazon."
The reports are very thorough and will show you all of your sales within a set period. They even take pricing changes, discounts, and other promotions into consideration when generating the reports for you.
Europe VAT Import Tax vs Profit Calculations
If you are registered for VAT, Import VAT is reclaimable. You will not need to include Import Tax in your profits.
You won't need to pay VAT twice for a product, and you will be able to write off the import Amazon VAT when your tax return is filed. It's almost like a deposit you can reclaim after selling your products.
Please note: Import Amazon VAT and Import Duties are different - Import Duties will need to be considered in figuring your profit margins.
EORI Numbers
The EORI links imported goods to your VAT and business number. If your products or goods are in Europe already and you have no intention of importing, you will not be required to have an EORI number. You will need your EORI before you can start importing your products to avoid customs delays and allow you to claim your Import VAT.
Here is a link to apply for an EORI number using the gov.uk website. EORI numbers are easy to acquire and have no restrictions.
Final Thoughts on Amazon EU VAT
While Amazon VAT can seem complicated, it should never be the reason that prevents you from exploring the European marketplace. If you have any issues or questions, you should always obtain proper legal advice from the tax authority in your respective country.
Disclaimer: The above information is made available on a good faith basis and is intended only for general education. The article should not be construed as tax or legal advice. We recommend consulting your tax advisor or contacting a duly certified tax professional and CPA to assist with any topics this article raises.
Frequently Asked Questions
Do Amazon prices include vat?
Amazon prices are VAT inclusive if the seller adds their VAT registration number to Amazon. Value-added tax is a tax levied on the sale of goods and services and is generally calculated based on the purchase price. If VAT is not included, this usually means the seller is not VAT registered.
Why am I paying vat on Amazon?
There are a few reasons why you might be paying VAT on Amazon. One reason could be that the seller is based in a country that charges VAT. Another reason could be that Amazon calculates VAT and charges on behalf of the seller. Lastly, it's possible that you're being charged VAT because your delivery address is in a country that charges VAT. If you're not sure why you're being charged VAT, you can contact Amazon customer service for more information.
What is the Amazon tax/VAT exemption program?
The Amazon tax/VAT exemption program is a program that allows Amazon sellers to sell certain items without paying taxes. This includes items that are considered to be necessities, such as food and medicine. The program also allows Amazon sellers to sell items that are used for educational purposes, such as books and textbooks. The Amazon tax exemption program is a system whereby certain items sold on Amazon.com are not subject to VAT.
How do I provide my VAT ID to Amazon?
If you're a business registered for VAT in an eligible country, you can provide your VAT ID to Amazon when you create an account. After you provide your VAT ID, we'll automatically apply the VAT rate for your country to eligible items that you sell on Amazon. You can update your VAT ID at any time in Your Account.
How to get Amazon VAT invoice?
To get an Amazon VAT invoice, you will need to log into your account and go to the "Orders" section. From there, you will be able to select the order for which you would like to receive a VAT invoice. Once you have selected the order, you will need to click on the "Get Invoice" button and follow the instructions on the screen.
What is the Amazon VAT calculation service?
Amazon VAT calculation service is a web-based tool that acts as seller support in calculating VAT on their sales. The service provides a VAT calculator and returns filing service. Businesses can use the calculator to compute VAT tax on their Amazon sales, and the VAT filing service to file their returns.
