Alongside Apple, Amazon has become a Trillion-dollar company this month with no signs of slowing down.
Since 2000, Amazon has been offering small businesses a way in to reach global markets quickly. According to the e-commerce giant, 40% of total unit sales come from third parties. For small and medium sellers Amazon has low barriers to entry and instant exposure to over 300 million active users. Easy to see why it’s an attractive market to enter.
Globally, retail e-commerce sales are said to be worth $3 With the growth and ease of online shopping, more and more small and mediums businesses have set up through the online marketplace Amazon.
However, with the ease of selling cross-border comes the responsibility of Value added Tax on goods traded online.
In recent months Amazon has been requesting that online sellers register for VAT even though this is not completely necessary as per the tax laws which prevail in some countries.
As international VAT experts, we know the importance and complexities that tax can bring on a business. Therefore, we have created a helpful overview for Amazon sellers to consider lightening the burden that tax brings.
VAT Guide for Amazon Sellers by SimplyVAT
1. Know the EU distance selling rules and the thresholds for each EU member state.
- When selling cross-border across all 28 EU member states
- When selling goods online from one EU country to another
- Only when selling to private consumers who are not VAT registered (a B2C transaction).
- When you are responsible for the delivery of the goods
Your business won’t need to register for VAT in the country of arrival until your annual sales turnover reaches the distance selling threshold. These vary from €35,000 to €100,000 so check the country you are selling into and monitor your cross-border sales regularly. For a full list see here.
2. You need to consider where is your company based?
Different rules apply if you are a non-European business selling into the EU or an EU based company selling into the EU. Read the guide to European e-commerce VAT.
3. As an Amazon seller you may be selling B2C but are is your business doing B2B transactions?
Business to business transactions within the European Union are Zero rated when selling cross-border to an EU VAT registered business.
For business to customer transactions the correct rate of VAT must be added and the distance selling rules will apply in Europe.
Check if a VAT number is valid here.
4. Pan – European FBA
If you are signed up to the Amazon Pan European FBA, you will automatically need to register for VAT. As Amazon is storing your inventory in 7 fulfilment centres across Europe, you will need to register for VAT in 7 countries.
- If you are a non-EU company you will require Fiscal Representation in France, Spain, Italy and Poland which may come at an extra cost.
- Find out more about how you can plan for the PAN-EU programme
5. Prepare for Brexit
As an online retailer selling cross-border especially into or out of the UK you need to be aware of the potential impact of a no deal or a hard Brexit. Either way, it is likely that customs and VAT are set to change significantly. Read our overview of the potential impact of Brexit on businesses.
So far, the UK government have cited the following around VAT in the event of a no-deal.
- Businesses will continue to zero-rate goods to EU consumers
- UK registered businesses will not be expected to complete EC sales lists in B2B transactions
- Import VAT and customs would be due when goods enter the EU
- Some VAT payments may be due at the border (varying from each member state)
- For those trading services into Europe, you would no longer be able to use the MOSS system and would need to register for the VAT MOSS non-Union scheme
6. The obligations of online marketplaces
In recent months governments in Australia, the UK, France and Germany have been putting the spotlight on marketplaces such as Amazon, in a bit to ensure that sellers are being compliant and paying the correct taxes due. Many countries are introducing legislation that makes EDP’s jointly liable if online seller fail to register for VAT correctly.
7. Remember it’s the law
Registering for VAT when required is not an option but a legal obligation. Failure to register or large payments could result in hefty fines, penalties or large backdated payments. If you choose to not comply to your obligations by refusing to register, you will now not be allowed to sell on platforms such as Amazon and eBay to ensure that they do not hold joint liability for your business’ sales.
Furthermore, it can take between 2-10 weeks to receive a VAT registration, so ensure you add it into your business plans.
8. Understand which VAT rate applies to your goods
Different products have different rates in different countries even amongst EU member states. For instance, all rates vary from Italy, France to the UK, so it’s worth checking.
9. Understand where you need to pay VAT
In the US they do not have the system of value added tax, but the system of sales tax which is added at the end of the point of sale as opposed to at every stage of production.
10. The potential for an Audit
There are multiple things that can trigger an audit such as late or non-existent VAT submissions or late payments. One of the more recent triggers is that of all non-UK based businesses trading on online marketplaces. HMRC have currently been undergoing these specific sellers and have targeted over 30,000 businesses so far.
Are you an Amazon seller needing help with VAT registrations? SimplyVAT are offering 10% off German and UK registrations.