July 21, 2019
If you’re considering expanding your Amazon operations into the European market, you have probably heard of Amazon VAT (Amazon Value Added Tax).
Chances are you’re confused and concerned over VAT and how it will affect your bottom line.
VAT may seem a little complicated to newcomers in these markets, but they really aren’t as complex as you think and shouldn’t stand between you and your opportunities for growth!
Let’s take a look at Amazon VAT, and how it would impact your sales.
Before we get started, here are a few thoughts to keep in mind when you are exploring expanding your Amazon business into the European market:
VAT, or Value Added Tax, is a tax that consumers must pay in Europe and is collected by the sellers.
When someone purchases something, the total price they pay will automatically include this tax. In America, for instance, someone will buy something for $4, plus tax. European consumers would pay $4.80 in total, if the VAT was 20%.
The VAT will vary according to the country. The UK has a VAT set at 20%, while Germany’s is 19%. Here is the full list of European countries and their VAT rates.
How this affects you, as an Amazon seller, is that your total sales prices will need to include VAT. You will receive a separate tax bill for all incurred VATS.
VAT computations follow a simple formula:
Reminder: Your final sales price through Amazon Seller Central should include the VAT; make sure to add it to your profit calculations.
VAT will never reduce your profit margin if you make sure to set it to include the tax.
It is important to take into account VAT costs when conducting product research, not simply products that have low competition rates and are in high demand.
Remember that Amazon VAT costs are calculated from your Net Price, not your final selling price.
If you already have your final selling price figured and need to know how much tax needs to be added, work backwards using this handy VAT calculator.
There are two circumstances in which you will need to apply for a VAT registration number.
Amazon sellers have two ways to get their VAT numbers:
There are several ways to operate your FBA business in Europe. Here are three of the simpler, more streamlined models:
EFN’s are the usually the easiest way to get started. Here are some of the advantages of EFN:
Pan-European FBA offers the great potential and comes with the fastest delivery times and lowest shipping costs. Here are some of the advantages to using Pan-EU FBA:
Pan-European VAT registration can be quite complicated. You are required to register and comply with VAT in seven EU countries, submit VAT returns throughout the financial calendar, and communicate with the applicable tax departments, often in their respective language.
Generally, the best choice EU storage option for new sellers is to start with an EFN and CEE in order to cover all of the UK and German locations.
As yours sales increase, you can move to the Pan-European method.
The two biggest things to remember about registering for VAT is that you will need a separate registration for each company, and that you will need to file VAT returns routinely.
Even though VAT registrations and returns are not complicated, it still may be advisable to leave the process to professionals to save time, paperwork, and costly errors.
You have three options for filing Amazon VAT.
Amazon generates monthly sales reports that include all sales data, including data you will need for your VAT returns. These reports can be given to your accountant so they can file VAT for your business.
The reports are available in Amazon Seller Central, under “Reports > Fulfilment By Amazon.”
The reports are very thorough and will show you all of your sales within a set time period. They even take pricing changes, discounts and other promotions into consideration when generating the reports for you.
If you are registered for VAT, Import VAT is reclaimable. You will not need to include Import Tax into your profits.
You won’t need to pay VAT twice for a product, and you will be able to write off the import Amazon VAT when your tax return is filed. It’s almost like a deposit that you can reclaim after your products are sold.
Please note: Import Amazon VAT and Import Duties are different - Import Duties will need to be considered in figuring your profit margins.
The EORI links imported goods to your VAT and business number.
You will need your EORI before you can start importing your products to avoid delays in customs and to allow you to claim your Import VAT.
If, however, your products or goods are in Europe already and you have no intentions of importing, you will not be required to have an EORI number.
Here is a link to apply for an EORI number using the gov.uk website. EORI numbers are easy to acquire and have no restrictions.
While Amazon VAT can seem complicated, it should never be the reason that prevents you from exploring the European marketplace. If you have any issues or questions, you should always obtain proper legal or tax advice for your respective country.