As a busy entrepreneur you have managed to successfully set up your e-commerce business in an EU country! A logical next step would be to expand the reach of your product by distributing through an established online retailer such as Amazon EU. Below we address how to navigate the proper VAT channels as a first-time seller on Amazon EU.
Which VAT issues should you consider as a first-time seller on Amazon EU?
Amazon Seller Central – How does it affect Amazon VAT registration?
Amazon Seller Central is the web interface used by businesses to sell their products directly to Amazon customers. Since Amazon is one of the most well-known international online retailers, by making an account you can reach a much larger market in their customer base. There are many other benefits as well, such as access to analytics (consumer data), pricing control and messaging control.
When you sign up for Seller Central, the nature of your VAT registration may change depending on how you structure your business. You can decide to take one of the following approaches:
- FBM (Fulfillment by Merchant):
You will address each individual order yourself (shipping, returns and customer service) and your entire inventory is stored in either your home or a company warehouse. This is usually recommended if you are just starting out as it is usually cheaper than the FBA scheme, and also if you sell through multiple marketplaces so that you have more control on stock management. When it comes to VAT, this means that you are solely responsible for ensuring VAT registration for each sale – Amazon is not involved.
- FBA (Fulfillment by Amazon):
You can choose to let Amazon take care of the orders through their FBA (Fulfillment by Amazon) scheme. If you make use of FBA then you are going to store your stock in amazon warehouses across several countries in the EU, from where Amazon will then distribute to your buyers. In terms of VAT registration, you will need a local VAT number for every country where your inventory is stored. Amazon will charge VAT to your customers and report to the tax authorities on your behalf, and then you will have to file separate tax returns for the corresponding purchases.
One Stop Shop (OSS) scheme and Fulfillment by Amazon (FBA)
As mentioned in our OSS blog, if you have established an e-commerce business in an EU country and you distance sell across multiple countries in the EU, then you are most likely making use of the OSS scheme. The OSS scheme allows the seller to get a single VAT number, avoiding multiple VAT registrations for sales in different EU countries. VAT still needs to be charged according to the destination country’s VAT rate, but you can use the same VAT number for registration. If you make use of the Amazon Seller Central platform but take care of all orders by yourself, then you can also make use of the OSS scheme. However, if you are using the FBA scheme then you will need additional VAT numbers for each country where you hold inventory.
If your sales are growing exponentially and you are looking to expand even further, you might consider opting for the Pan-European FBA. For this scheme, you send your stock to just one Amazon warehouse. From there, this scheme allows Amazon to transport your inventory between their warehouses in different EU countries, to allow for faster delivery times to your customers. In this case it can increase sales and streamline your workload, as Amazon’s Pan-European FBA algorithm will calculate how much of your inventory should go to which country. They can transport your inventory at their own discretion at any possible time, without additional costs to you. Regardless, you will still have to apply for individual VAT numbers corresponding to each of the countries where your inventory is held, and take care of VAT payments and returns yourself.
Post-Brexit: but what about Amazon UK?
The UK is no longer a part of the EU, but their system of Amazon VAT registration is pretty similar. If you are selling to customers in the UK via Amazon (or any other online retailer) then Amazon VAT registration depends on two things:
- whether your inventory is stored in an FBA warehouse in the UK
- whether the value of your sale is above £135
If you have inventory in an FBA warehouse in the UK, you would have acquired import VAT at the UK border through customs. Just like within the EU, Amazon is responsible for charging VAT to your customers, but you will have to register a VAT number for the UK and file the returns.
If your inventory is stored outside of the UK, then it depends on the value of your sale. If the value is higher than £135 then you will be obligated to pay import VAT and therefore register for a VAT number. If the amount is less than £135, then no import VAT is required and a VAT registration is not necessary.
Got any questions on Amazon VAT registration as an Amazon seller? or need help navigating your Amazon VAT requirements?
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