Value added Tax (VAT) and being an Amazon Seller can be a hard path to navigate. I get a lot of queries about VAT and Amazon, so I thought I would create this post to cover to give you as much information as you need. This psot will cover UK VAT, distance selling to the EU and Pan European FBA VAT.
What is Value Added Tax (VAT) ?
Valued Added Tax (TAX) is sales tax paid for by the end consumer, in this case on Amazon. This tax is used in all European countries and in individual states in America. Some people refer to this as GST (good and services tax) but it is all sales tax.
Do you need to register for VAT when selling on Amazon, the answer is not until you hit £85,000 UK turnover.
In the UK VAT is 20% that means if you buy an item which is VATable then you will be charged the price plus 20%. This is the standard-rated VAT for most goods, however, there are exceptions.
5% VAT – Amazon Item Examples
- Children’s car seating
- Radiators
- Gas/Oil fired boilers
- Solar panels
- Water and wind turbines
- Maternity Products
- And more
Zero Rated VAT (0%) – Amazon Item Examples
- Charity shops, selling donated goods
- Equipment for disabled people
- Low-vision aids
- Printed books
- Children’s clothing and footwear
- Motorcycle and bicycle helmets
- Food And Drink
- And more
Exempt VAT – Examples (there are few Amazon examples)
- Admission charges by charities
- Lottery tickets
- Betting and gaming (matched betting)
- Bingo
- And more
You can get a more detailed look at VAT rate on the HMRC website and it always worth check. This information only relates to the UK. Each country has its own VAT rules.
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VAT Registration Thresholds
You can voluntarily register for VAT, but most typically won’t because they are selling on Amazon which means the customer pays the VAT. Most Amazon sellers register because they hit the threshold.
Thresholds are different across the EU (see distance selling later)
If you make taxable supplies over £85,000 in a 12 month period then you need to register for VAT.
You need to register if you think you are going to go over £85,000 in the future. So make sure you keep an eye on it.
How do I work out my taxable turnover? Is it before or after selling fees?
You need to take your gross sales figure before Amazon deductions. So you need to make sure you don’t base it on what is clearing your bank account.
Make sure you check your sales report on Amazon to make sure you have not breached the £85,000 threshold.
Always give yourself enough time to register. If your Amazon sales look like they will reach the £85,000 then do the work before it is too late.
Some people focus on keeping below the £85,000 because they don’t want to have to change their pricing structure and do not want hassle of VAT returns.
Some may go over the VAT threshold one month, but can ask for a temporary exemption from VAT. Find our more details here.
IF you drop below the VAT threshold you can always deregister.
Selling in the EU on Amazon – Distance Selling Rules
Distance selling rules are for those who sell from the UK to another EU country. So if you sell on Amazon and sell from the UK and do not store your goods in the EU then you will be covered by the distance selling rules.
They have separate thresholds for each EU country. This can be come complicated as you need to monitor your sales to each country over a calendar year. Registering for VAT in a different country can be difficult due to the language and complexity. You normally need to get a professional to help.
What are the VAT distance selling thresholds across the EU?
Austria € 35,000
Belgium € 35,000
Bulgaria BGN 70,000
Croatia HRK 270,000
Cyprus € 35,000
Czech Republic CZK 1,140,000
Denmark DKK 280,000
Estonia € 35,000
Finland € 35,000
France € 35,000
Germany € 100,000
Greece € 35,000
Hungary € 35,000
Ireland € 35,000
Sweden SEK 320,000
Italy € 35,000
Latvia € 35,000
Lithuania € 35,000
Luxembourg € 100,000
Malta € 35,000
Netherlands € 100,000
Norway N/A
Poland PLN 160,000
Portugal € 35,000
Romania RON 118,000
Slovakia € 35,000
Slovenia € 35,000
Spain € 35,000
United Kingdom (non-EU) £70,000
Switzerland N/A
Up to date as of August 2020
This only applies to those who store their Amazon goods in their home country and send abroad to the EU. It is also key to note this is different to the UK threshold as we measure it over a calendar year rather than a rolling 12 month period.
If you store goods in other countries and use Amazon Pan European FBA system then you need to continue reading as you may need to register for VAT from the start.
Place of supply (Location of goods)
VAT rules are built around where the goods are stored. So if your an Amazon Seller from the UK and send the item from the UK, then they are UK sales. If you are based in the UK and sell using FBA, your good may be stored in Germany. If your goods are stored in Germany then you are subject to German VAT rules (not the distance selling threshold).
Amazon have been stopping people using FBA if they do not give a valid VAT certificate for each country they store goods in.
If you store goods in another country other than your home country then you need to register for VAT in that country. This should put a lot of people off the pan-european amazon fulfilment program. The cost of registering in several countries can be quite high and unless your business will scale quickly you may want to hold off.
Amazon VAT Seller Examples
Amazon seller location: UK
Stock storage: UK
Taxable supplies(Sales): £30k in the last 12 months
Need to be VAT registered? No because you are below the VAT threshold of £85,000
Amazon seller location: UK
Stock storage: UK
Taxable supplies(Sales): £89k in the last 12 months
Need to be VAT registered? Yes, you have exceeded the VAT threshold of £85,000
Amazon Seller location: UK
Stock Storage: UK, Spain and Slovakia
Taxable Supplies (Sales): £30k in the last 12 months
Need to be VAT registered? Yes, you need to register in Spain and Slovakia because you store stock there. You do not need to register for UK VAT as you have not met the threshold in the UK.
Amazon Seller location: UK
Stock Storage: UK, Italy and Poland
Taxable supplies(Sales): £100k in the last 12 months
Need to be VAT registered? Yes, You will need to register for VAT in all countries as you have stored your goods in Italy and Poland but you also have gone over the VAT threshold of £85,000 in the UK.
Amazon Seller location: UK
Stock Storage: UK
Taxable supplies(Sales): £60k in the last 12 months, £40k to Italy in 2020
Need to be VAT registered?: Yes, you need to register in Italy because you have breached the €35,000 threshold for distance selling.
Seller location: UK
Stock location: France
Taxable supplies(Sales): £10k in last 12 months
Need to be VAT registered?: Yes, because you have stored stock in France and therefore need to register for VAT immediately.
These are the most typical scenarios a UK-based seller will face.
Do you use Facebook, Microsoft or Google ads to drive your Amazon business? Learn more about the VAT implications of reverse charge VAT spend and online ads.
What to do next?
If you think you need to register for VAT in the UK or elsewhere please get in touch with us. We are expert eCommerce Chartered Accountants and understand all aspects of selling on Amazon. Either send us an email or book a free consultation here: Contact us or find out more about us as Amazon Accountants.
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