From 1st July 2021 the EU have changed the way they manage VAT for sellers selling into Europe.
They have abolished the small consignment relief and that means that all items going from ‘third countries’ such as the UK into to the EU are now subject to VAT at the border.
To ensure that the customer experience is maintained, the EU also launched the new IOSS and OSS schemes.
These schemes allow vendors to charge and collect VAT at the point of sale and means customer will not get charged VAT by the border authorities – avoiding disgruntled customers and bad reviews!
But, how do the EU’s VAT changes affect Amazon sellers and what changes do they need to make?
How the IOSS Scheme Applies to Amazon Sellers
The Import One Stop Shop (IOSS) scheme has been created for businesses without a registered office in the EU, allowing the sellers to collect, declare and pay the relevant VAT to EU tax authorities without the need for the customer to pick up the bill.
The new rules include a section on online marketplaces like Amazon and eBay. The EU have now classified them as the deemed supplier and therefore it is their responsibility to get the VAT correct.
That means that – by registering for the IOSS scheme – online marketplaces such as Amazon effectively act as the as the seller on your behalf and collect VAT at the point of sale.
Therefore, sellers can use Amazon’s IOSS number to ensure any items shipped by the merchant outside the EU into the EU does not get hit with unexpected VAT charges.
How Does This Work When Making Sales on Amazon?
When you sell an item to a customer in the EU, France for example, Amazon will state that this as an IOSS order on Amazon Seller Central.
When the purchaser goes to buy your item, your list price will remain the same but the relevant European VAT will be added at the checkout. This means that you do not lose any VAT but Amazon add it and collect it.
In this case a sale of EUR 112.96 to France would be EUR 22.60 of French VAT to be paid by the customer. Unlike the old regime in the EU and UK, you will not be paid the VAT in your payouts but Amazon will withhold this and pay the local tax authority this money.
So how can I use Amazon’s IOSS number to send items to Europe?
The customer has paid the VAT already and you now need to send the item to the EU without incurring any tax charge for the customer at the border.
To do this you will need to use Amazon’s IOSS number on your customs form. Amazon give you this information on the order details page and you can see the Amazon IOSS number you need to quote.
Where do I put the Amazon IOSS number on the customs form?
Now you have made the sale and you have the IOSS number you need to put the number into the customs form under the Tax Schemes/VAT Reg/EORI number section.
If you are using an integration with Royal Mail they will place an IOSS sticker on this form automatically from Amazon, other delivery companies may have similar options available in the future.
All in all, this is a simplification of VAT rules for those selling on online marketplaces and it can be really easy for you to send goods to Europe when using fulfilled by merchant on Amazon.
What about Amazon FBA Sellers?
For Fulfilled by Amazon (FBA) sellers, the rules are slightly different.
FBA items by nature are stored within warehouses in the market they are sold in. Therefore, you will still need to register for VAT in the country where you store your items. This means that IOSS rules do not apply to FBA sellers, but they can take advantage of the new One Stop Shop (OSS) scheme instead.
The new OSS scheme allows merchants to report sales in an EU country where their stock is held as opposed to the UK. This means that you report your sales to the country you are registered for VAT in on an EU-wide basis.
Make sure you are Compliant with the EU’s New VAT Rules
Whilst these schemes can seem daunting at first, they should help simplify the VAT process for Amazon sellers.
As specialist ecommerce accountants, we deal with Amazon sellers everyday – helping them with accountancy issues such as tax, VAT and cloud accounting.
If you want to learn more about the new UK and EU VAT rules introduced in July 2021 and want to get set up on the relevant schemes, book a free 30-minute consultation call with us today and we will guide you through it.