Posted by As a UK-based Amazon seller, one of the biggest hurdles you will face is the intricacies of Amazon Seller VAT. VAT (Value Added Tax) or a tax on most goods and services consumed in the UK and other EU countries is a consumption tax. Noncompliance with VAT regulations may result in grim outcomes such as penalties, seizure of products, or even suspension of your Amazon seller account. This is where the importance Amazon account management services play a crucial role.
This all-encompassing post will explore everything you need to know about Amazon Seller VAT, including how to claim and handle it, and EORI (Economic Operator Registration and Identification) for import/export, while also highlighting US Sales Tax.
Understanding VAT and How It Works.
VAT is levied at each stage of the supply chain including manufacturers, wholesalers, retailers and finally, the end consumers. Every company charges and remits VAT on its sales to the particular country’s tax authority and collects back the VAT paid on business costs.
VAT registration is required in each country where a business has a taxable presence, which can be determined by factors like inventory storage, company registration, and distance selling thresholds.
Distance Selling VAT and Thresholds
Distance selling involves the sale and delivery of products from one EU Country to a final consumer in another EU Country. To overcome this, each EU country has defined a distance selling threshold for inter-EU trade. If a business sells less than the threshold to a particular country, then VAT needs to be collected in the home country only. Once the threshold has been exceeded, the owner must register for VAT in that country and charge VAT at the rate in force there.
For example, if the threshold for Value Added Tax in Germany is €100,000 and you, a US-based business, exceed this threshold or expect to do so in the coming 30 days, you have to register for German VAT and file the returns regularly.
EORI (Economic Operator Registration and Identification)
If you import or export to or from the UK, you’ll need an EORI (Economic Operator Registration and Identification) number. This specific code is used to clear customs and VAT when doing business with other non-UK countries.
The acquisition of the EORI number is not a complicated one, yet you must have it ready before you participate in international trade. Amazon account management services can help in getting and managing your EORI number for you.
How to Claim Amazon Seller VAT
VAT is applicable at each stage of the supply chain, whether the manufacturer, wholesaler, retailer, or end-consumer. VAT-registered businesses charge VAT on their sales and pay it to the appropriate tax authority while also being able to claim back VAT paid on business expenses. This act of claiming back the VAT paid on expenses is known as input tax deduction.
As an Amazon seller, you can claim the VAT that you paid on any business expenses like product inventory costs, shipping and delivery charges, and other marketing costs. To claim Amazon Seller VAT, you’ll need to maintain accurate records of your expenses and sales and file VAT returns regularly with the UK’s HM Revenue and Customs (HMRC).
How to handle Amazon Seller VAT
Amazon sellers have two main options for handling Amazon Seller VAT
- Hiring a Fiscal Agent: This method is the simplest way of handling Amazon Seller VAT especially directly for international vendors and USA-based companies. A fiscal consultant can take you through the whole process, including the completion of VAT registration and filing returns in the required language for each country.
- Establishing a European Business: This is also an option that is available but sellers usually opt out of it due to the complexities and very few benefits it displays.
Furthermore, Amazon has provided a central point of information for Amazon Seller VAT through an information resource centre, and now sellers can manage VAT through their Amazon account settings.
European Storage Options for International Amazon Sellers
As an international Amazon seller, you have several storage options for your inventory in Europe:
- European Fulfillment Network (EFN): It enables you to provide your items to several EU marketplaces by stocking the goods in one country. You’ll need to register for VAT in the countries where you have inventory stored.
- Pan-European FBA: The Amazon warehouse network does this automatically and routes your goods to be in the warehouse based on consumer requests. However, storing the products in other countries will create a VAT obligation, requiring you to become a VAT registrant in that country.
Choosing Between a Local Company or Non-EU/UK Seller
Deciding whether to set up a local company or sell as a non-EU/UK seller has its pros and cons:
- Setting Up a Local Company: Making collaboration simple, but also creates an almost opposite challenge, which is licenses and differentiated tax filings.
- Selling as a Non-EU/UK Seller: This option is rather easier since you don’t have to play with the new company’s beginning or any licensing issues. On the other hand, it is likely to limit you from bonding with your local neighbours.
Eventually, with so many platforms, your results may depend on your business needs and goals. Amazon Seller VAT returns do not necessarily thin your profit margins if you set your prices to include the tax. Nevertheless, VAT expenditures should be calculated at the stage of product research to ensure profitability and also it is important that how to select the right product to sell on Amazon.
As VAT registration requires a separate registration process for each company and regular VAT return filings, it might be challenging and time-consuming. Nevertheless, this should not discourage one from following through with the process alone, but it is advisable to seek assistance from experts to save time and avoid costly mistakes.
Amazon provides VAT registration and filing services, but you can also hire a third-party tax agency or work out the process yourself.
The Sales Tax in the USA: A Glance
While the UK operates under the VAT system, it’s worth noting the differences between VAT and sales tax in the United States. Unlike VAT, which is collected at every stage of the supply chain, sales tax in the US is only charged to the final consumer.
The rates of the sales taxes differ between the states as well as jurisdictions making compliance more complex for businesses operating in multiple states. However, similar to VAT, businesses are responsible for collecting and remitting sales tax to the appropriate state authorities.
Conclusion
When managing Amazon Seller VAT through the US and UK/European marketplaces, there are complexities, but it is vital for success. Knowing VAT, distance selling threshold and filing rules will help you prevent the hefty penalties that will ensure that your activities are not affected.
Utilize the VAT tools and services provided by Amazon or explore the options of expert Amazon account management services like those offered by MMF Infotech for professional help. By using our professional advice, you are capable of expanding your Amazon business into new markets by keeping account of the 2024 eCommerce Calendar for Amazon Sellers while remaining VAT-compliant and maximizing your profitability.
