Amazon Sellers should use VAT Services on Amazon to stay compliant with the new EU VOEC legislation. Sales made to sellers with an EU VAT registration number may be subject to EU VAT collection under a reverse charge mechanism. It is important to ensure compliance with EU tax laws if your business has been established outside of the EU.
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Why is Amazon collecting EU VAT on certain fees?
Under European Union Value Added Tax (EU VAT) rules, Amazon will calculate and collect EU VAT on monthly subscription fees and Selling on Amazon fees related to sales made by Amazon sellers who meet the following criteria:
- Do not have an EU VAT registration number; and
- Are a resident of an EU country; and
- Sell on a non-EU website.
- Sales made to Amazon sellers with an EU VAT registration number may be subject to EU VAT collection under a reverse charge mechanism.
What has changed?
Amazon will collect VAT from all goods delivered to EU business-to-consumer customers (B2C), effective July 1, 2021 for all orders made through any Amazon store where:
- Goods are shipped from stock outside of the EU in a shipment that has an intrinsic value up to EUR150. This is known as the Import One Stop shop, Or
- Any goods of any value can be delivered from stock stored in the EU, where you, as the Amazon seller, do not have a physical presence in the EU.
Important to remember that these changes will not affect your EU VAT registration obligations. It is your responsibility to comply with EU VAT registration obligations. This includes goods held within the EU. You also have to declare EU VAT on any transactions that are not covered by the EU VAT legislation.
VAT Services on Amazon can help you stay VAT-compliant in the EU so you can focus on growing your business.
VAT Services on Amazon allows you to manage European VAT registrations and file obligations through a third party tax service provider in as many as seven countries (UK. Germany. France. Spain. Poland. The Czech Republic. This allows you to spend more time growing your business in Europe by handling VAT compliance faster and more efficiently.
Use VAT Services on Amazon to manage your VAT registration, filing and submission requirements. Amazon works with global tax service providers to enable VAT compliance in UK, Germany, France, Italy, Spain, Poland and Czech Republic.
Low Cost: As a special ongoing promotion, we are providing the first year of service free* – which includes VAT registration and filings. In addition to the first year free promotion, for Year-2 you only need to pay €400 per year per country for your on-going VAT filing report submissions.
Automated VAT Filings: You benefit from online and fully automated VAT filings integrated within Amazon Seller Central for your Amazon transactions.
Customer Support: Your tax service provider will guide you step by step through your VAT Registration and once you begin your online VAT filing, you will receive dedicated customer support from Amazon.
One of the most common issues we deal with is Amazon sellers having their European accounts suspended because of issues with the local VAT authority,” says Diana of Amazon Global Selling. “The vast majority of these problems could have been easily avoided if they had spent some time upfront planning and understanding their VAT obligations.
4 steps for handling VAT
Get expert guidance to understand VAT obligations early on
Given the complexity of VAT, and how different it is from US sales tax, most Amazon sellers hire a European tax expert. Many of these VAT experts provide a free first consultation.
“VAT isn’t something I would trust to your local US accountant,” says Elena Castañeda of Bling Jewelry, who expanded from the US to the UK in 2010. “We found a great VAT firm, AVASK, through Amazon’s Service Provider Network, who guided us through the entire process, from planning to ongoing filing.”
Strategize and prepare to launch
“As soon as you’ve started thinking about selling in Europe, make sure you do your research on VAT,” says Lavina Hasija of Amazon’s European Marketplace team. “Have an expert work with you from the start. VAT will impact your strategy from the beginning, including pricing and fulfillment.”
Pricing Applicable VAT rates vary by country and product category, among other factors. Confirm with your VAT advisor what rate you must apply to your display price.
“Our pricing varies by country and is based on an algorithm that builds in VAT for each country,” says one Amazon seller. “We generally try to match what our net in the US would be, taking into consideration extra shipping costs, VAT, currency exchange rates, etc.”
Dan of Blink Home Security says, “I wish that I’d gotten my VAT registration started earlier, as that process took us longer than expected, and we couldn’t send the shipment until we had the VAT registration number.”
Launch and adapt as you grow
As your sales grow over time, other fulfillment options might make more sense for your business. Through Pan-European FBA, Amazon moves your inventory among seven European countries based on customer demand. This means the Amazon seller must be VAT registered in all seven countries.
“We transitioned to Pan-European FBA due to the benefits of quicker shipping times, cheaper shipping costs, and the fact that we were close to a sales velocity that would justify registering for VAT in all seven required countries anyway,” says one Amazon seller. “After transitioning, we saw a sales increase that justified the upfront spend on additional VAT registrations.”
Outsource the filing of your taxes
As you launch and grow your Amazon Europe business, tax filing will be required monthly or quarterly, depending on the country. Rather than manage the reporting yourself, outsource it to a European VAT service.
“A good VAT service should be monitoring your European sales and guiding you regarding any changes in your VAT obligations as your business grows,” Dan says.
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