VAT Advice for UK Amazon FBA Sellers

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Tax & VAT Advice for Amazon FBA Sellers

With the rise of online marketplaces consumers have become considerably more comfortable buying online and businesses have been given the ability to sell not just within their own country but overseas as well. Amazon FBA facilitates this process allowing business to reach potential customers in Germany, Italy, Spain & France. But where there is such huge expansions, tax authorities start to take notice and make legislative changes to ensure their rules keep up.  VAT on Amazon FBA is one such area which has been the subject of much discussion, change and now confusion.  So here I consider four likely scenarios that an Amazon FBA Seller may find themselves in and the VAT implication of each:

  1. UK VAT Registered Amazon Seller Planning to Use Amazon FBA in Germany, Italy, Spain and/or France;
  2. UK Amazon Seller not UK VAT Registered but Planning to Use Amazon FBA in Germany, Italy, Spain and/or France
  3. UK Amazon Seller Warehousing Your Own Product in the UK and Shipping to EU Countries;
  4. UK Amazon Seller supplying products only in the UK.

First of all let me explain a little about how VAT works within the EU and why certain changes have had to take place.

How does VAT Work on EU Sales?

VAT is a tax on consumers not businesses (unless they are not VAT registered). And VAT is a tax that exists in all EU countries, including Germany, Italy, Spain & France on Amazon FBA, albeit at different rates and with different names.

In the past when a Company supplied a consumer with a product they had to add VAT at the rate in which their business was based, not where the consumer was.  However, what this meant was large businesses were storing their stock in one EU country and then locating themselves in EU countries with lower VAT rates.  This meant they could undercut the competition by being able to charge a lower VAT rate, a practice did not go un noticed by tax authorities and led to a change in the rules.

The EU VAT Rule Change 

A business must now register & report for VAT on sales in every EU country in which it STORES stock or consignment stock regardless of business turnover and its business location.

The Effect on a UK VAT Registered Amazon Seller Planning to Use Amazon FBA in Germany, Italy, Spain and/or France 

If you are a UK VAT registered business planning to send stock to Amazon FBA warehouses in Germany, Italy, Spain and/or France the new regulations mean that you must register your business for VAT in each of the Countries you plan to send your stock to.

So if you plan to sell in all the countries available to you via Amazon FBA that could mean an additional 4 VAT registrations all with their own reporting & payment obligations.  The registration is mandatory on the basis you are storing stock in those countries, not based on your turnover threshold. Every time you make a sale you must either add or take out an amount for that countries VAT from the total sales value.  Currently the standard VAT rates in the EU Countries included within Amazon FBA are:

Standard Rates of VAT
Germany 19%
Italy 22%
Spain 21%
France 20%

Just like in the UK, the rates are subject to change and reduced rates exists depending on the product you sell.

So that means up to 5 sets of VAT registrations & reporting, which could be costly to set up and administer.

The Effect an a UK Amazon Seller not UK VAT Registered but Planning to Use Amazon FBA in Germany, Italy, Spain and/or France 

Even if you are not UK VAT Registered and are below the registration threshold, currently £85,000, if you are planning to send stock to Amazon FBA warehouses in Germany, Italy, Spain and/or France the EU VAT rules mean that you must register your business for VAT in each of the Countries you plan to send your stock to.

So if you are planning to use Amazon FBA you will need to VAT register in each of the countries you will send your stock to -which could mean up to 4 VAT registrations even though you are below the UK threshold for VAT registration. The VAT registration in the countries are mandatory on the basis you are storing stock in those countries not your business turnover. Every time you make a sale you must either add or take out an amount for that countries VAT from the total sales value.  Currently the standard VAT rates in the EU Countries included within Amazon FBA are:

Standard Rates of VAT
Germany 19%
Italy 22%
Spain 21%
France 20%

Just like in the UK, the rates are subject to change and reduced rates exists depending on the product you sell.

So that means up to 4 sets of VAT registrations & reporting, which could be costly to set up and administer especially if you are not familiar with UK VAT reporting. And depending on your business turnover across all countries, you may also need to register for UK VAT as well.

Next: UK Amazon Seller Warehousing Your Own Product in the UK and Shipping to EU Countries >>

The Effect on a UK Amazon Seller Warehousing Your Own Product in the UK and Shipping to EU Countries 

If you store your own products in the UK and ship them yourself either within the UK or abroad, then you will not be subject to regulations requiring you to immediately register for VAT in Germany, Italy, Spain & France.

However you will be subject to registering for VAT in each of the individual countries you supply to if you cross the Distance Selling Thresholds each EU country individually set.  So it will be very important to monitor how much you are sending to each country.  The Distance Selling Thresholds are currently set at:

Distance Selling Thresholds
Germany  €       10,000
Italy  €       35,000
Spain  €       35,000
France  €       35,000

Get a Full List of Distance Selling Thresholds HERE

The rules of Distance Selling apply whether you are UK VAT registered or not.

If You Are UK VAT Registered But Below the Distance Selling Thresholds

You should charge 20% on all your sales to EU consumers and report this as part of your UK VAT return.

If you Are UK VAT Registered and Have Crossed the Distance Selling Thresholds

You must register and report for VAT in each of the countries you have crossed the threshold for and add that countries rate of VAT to each of the sales, not the UK rate as before.

If You are Below UK VAT Registration Threshold and the Distance Selling Thresholds

Do nothing but monitor your sales and the countries which you are selling to. If you total turnover for all countries crosses the threshold, currently £85,000, then you must register for UK VAT.  You must account for UK VAT on all your sales on your UK VAT return, until the point they cross distance selling thresholds at which point you will include them on the EU VAT returns.

The Effect on a UK Amazon Seller supplying products only in the UK.

If you are a UK amazon based seller only supplying products either yourself or via Amazon FBA you are only subject to the UK VAT rules which states that you must register for VAT when your taxable turnover exceeds £85,000. Find out more about UK VAT registration HERE.

The information contained in this website is for guidance and information purposes only. It should not be relied upon as professional accounting, tax and legal advice.  For specific advice relevant to your own situation, always contact a professional.