VAT Considerations for Selling on Amazon in Europe
Don’t overlook the significance of the European Value Added Tax (VAT) when selling on Amazon in Europe. Understanding the factors that impact your VAT helps eSellers make decisions that optimize profits.
The following is an introduction VAT and insights on strategies that impact your fees.
How Amazon Seller VAT is Calculated
VAT is a tax actually paid by consumers through sellers, which the sellers must then pay to European authorities. The first step in calculating VAT on a sale is to calculate the net price. VAT is derived from net price rather than the final selling price. Your net price equals production and shipping costs, plus Amazon fees and margin.
VAT percentages vary slightly by country. The UK VAT is 20 percent of the net price. For instance, a net price of €50 produces a VAT of €10. The consumer pays a total of €60, but the eSeller pays the €10 to the government.
Fulfillment by Amazon’s Influence on VAT
Amazon’s FBA program allows international sellers to easily manage inventory and distribution across five European Union marketplaces. With Pan-European FBA, you provide inventory to your local market fulfillment center, and Amazon uses smart technology to efficiently distribute goods throughout the EU. Taking these steps to reduce inventory management costs, also allows you to reduce the VAT amount.
Distance Selling Thresholds
Typically, when a company sells products to customers in foreign EU markets, it must collect local consumption taxes. However, EU VAT rules establish Distance Selling opportunities that may mitigate fees by allowing eSellers to collect taxes on home VAT rates of the seller. German eSellers for instance, which work with a 19 percent local VAT rate, can leverage Distance Selling with consumers in the UK and other markets that have a 20 percent rate.
There are certain thresholds sellers must meet to qualify for Distance Selling. These annual revenue thresholds are established independently by each EU member country. Germany and the Netherlands have minimum thresholds set at €100,000. However, several countries have lower minimums of €35,000, including Greece, Spain, France, Italy and Austria.
Using a Fiscal Representative
Even with a basic understanding of VAT, FBA and Distance Selling, there are barriers to direct VAT registrations in a lot of EU countries. In some cases, tax offices (including France and Spain) are reluctant to provide compliance requirements and reporting procedures in non-domestic languages. Poland and Bulgaria are also among countries that require foreign sellers to formally appoint a local tax agent.
These challenges speak to the important benefits of appointing a fiscal representative. These advantages include:
- Local representation from someone familiar with VAT and various registration requirements
- Meeting registration requirements for those countries that require a local agent
- Elimination of the requirement to immediately pay VAT at customers upon import of goods
- Simpler, faster and less stressful submission of VAT documents and processing of payments
Conclusion
Amazon is working hard to make selling processes and costs as optimal as possible for eSellers in the European Union. Doing so boosts the activity on the company’s international marketplace. However, it is up to providers to recognize the implications of VAT and to take steps to manage VAT in EU countries.
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