How to handle VAT

Updated on June 28, 2022

Learn the basics about VAT

With Amazon, you may reach millions of new customers across Europe, allowing you to drastically increase your sales. You must have a fundamental understanding of VAT, the European equivalent of US sales tax, in order to successfully enter the European market. We’ll go through what VAT is, what it implies for your business, and how to deal with it in this article.

We knew VAT was complex, but that didn’t slow us down.
Dan McCarthyBlink Home Security

How VAT differs from US sales tax

Taxes in the United States and the European Union are very different from each other. It’s important for non-EU sellers who plan to sell in the EU to be aware of two in particular:

Importers are responsible for paying VAT. A fulfillment center in the United States is exempt from sales tax. You must, however, pay the country’s import VAT as soon as you ship inventory to Europe (for example, when using Fulfillment by Amazon, or FBA).

Import VAT was a significant upfront financial expense for Dan’s company. Our sales velocity was sufficient to limit the loss of working capital between paying VAT at customs and selling the final product, so we were confident in our strategy.

The price includes the value added tax (VAT). In the EU, VAT is included in the list price, as opposed to the US, where sales tax is separate from the list price. Let’s imagine your product sells for $100 on Amazon.com. You would list it on Amazon.co.uk for $120 if you wanted to sell it in the UK for the same price (assuming 20 percent VAT). When comparing prices on Amazon’s European marketplaces, keep this in mind.

According to Melanie Shabangu of AVASK, one of Amazon’s VAT service providers, “sellers sometimes assume that VAT is collected and paid by the buyer or online marketplace.” There is no way for them to collect and save their own VAT duty, which means that when a VAT quarter is due, the payment must be made solely out of profits.” Avoid this by ensuring that VAT is included in the final retail price of your products and knowing the VAT rate you should be charging.”

Where to register for VAT

If you have inventory held in Europe, you must have a registered VAT number for that location. A common first step for selling partners in the EU is to store goods and register for VAT in Germany or the United Kingdom. Why is this so?
Due to the fact that Europe’s main commerce markets are in Germany and the United Kingdom, local inventory is critical in order to provide clients with speedier delivery choices. Get to know Amazon Europe’s various delivery choices to choose the one that best suits your needs.
Reduction of logistical disturbance caused by Brexit.
Compared to other European countries, VAT information in the UK and Germany is easier to obtain.
Additional VAT registrations may be required if the company grows and expands.
The length of time it takes to become VAT-registered varies greatly from state to state. Start the process as soon as your EU seller account is registered to avoid delays.

VAT Services on Amazon

Managing your VAT registration, filing, and submission obligations has never been easier than with Amazon’s VAT Services. VAT compliance is made possible via a partnership between Amazon and worldwide tax service providers that includes companies in the United States and the European Union.

Effective at a reasonable price
Amazon will pay for your first six months of filing and fiscal representation in all countries you subscribed to when you join VAT Services on Amazon! VAT services on Amazon might cost as little as €33.30/month after the first six months of service (1 country, without fiscal representation).

Simple
Find out how to register for VAT and how to automate VAT filings.
VAT Services on Amazon can take care of all of the complicated, expensive, and time-consuming paperwork for you.
Amazon and non-Amazon purchases are covered.
Provider of third-party tax services who is well-versed and reliable for submitting your VAT reports
Do you see any emerging trends that you can take advantage of?
Using Amazon’s VAT Services, you can get a free EORI in the UK and/or EU.
What are your favorite pastimes? What products are available to help with these endeavors? .
Localized customer service and assistance *
Your tax service provider may assist you in obtaining an EU EORI number for free, and they can also help you choose which EU country is the most appropriate place to do so.

Dedicated customer support

Dedicated customer support from our Seller Support team in Chinese, English, French, German, Italian, Spanish, Korean and Japanese is available through VAT Services on Amazon.

Get started with VAT Services on Amazon

3rd party service providers

Given the complexity of VAT, and how different it is from US sales tax, many sellers hire a European tax expert. Many of these VAT experts provide a free first consultation to discuss your specific need.

Tip: Some service providers offer both tax and shipping services to help sellers expand to Europe. For example, First choice shipping provides both services with promotions specific to Amazon sellers.

Popular picks from the service provider network

4 steps for handling VAT

Sellers’ European accounts are frequently terminated due to concerns with VAT authorities, says Diana, an Amazon Global Selling representative. Many of these issues could have been avoided if they had taken a little effort to plan and understand their VAT responsibilities in advance. ”

1

Get expert guidance to understand VAT obligations early on

Most sellers hire a European tax specialist because of VAT’s intricacy and how different it is from U.S. sales tax. A free initial consultation is offered by many of these VAT experts.

I wouldn’t rely on my local US accountant for VAT,” says Elena Castaeda of Bling Jewelry, which expanded from the United States to the United Kingdom in 2010. Our VAT business, AVASK, was recommended to us by Amazon’s Service Provider Network and helped us with the full process, from planning to continuous reporting.

Get discounted rates from VAT experts on Amazon’s Service Provider Network.​

2

Strategize and prepare to launch

According to Lavina Hasija, a member of Amazon’s European Marketplace team, “Make sure you do your study on VAT as soon as possible.” “Work with an expert from the beginning. Including pricing and fulfillment in your plan will be impacted by VAT.”

Pricing Depending on the country and type of product, VAT rates might vary widely. Your VAT expert should be able to tell you what rate you must apply to the price you display.

An algorithm that takes into account local VAT affects the pricing in each country, according to one vendor. As a general rule, “we strive to equal what our net in the US would be, taking into account extra shipping costs,”

It took longer than expected for Blink Home Security’s Dan to get his VAT registration going, and he wasn’t able to ship his package until he obtained his VAT registration number.

3

Launch and adapt as you grow

As your business grows, you may want to consider different options for fulfillment. Amazon transports your inventory between seven European countries based on consumer demand using Pan-European FBA. The supplier must be VAT-registered in all seven countries in order to meet this requirement.

When it came time to register for VAT in all seven required countries, one seller decided to switch to FBA because of the benefits of faster shipment times, lower shipping costs, and the fact they were already near to the sales velocity needed to justify it. Following the switch, “we experienced an increase in sales that accounted for the initial investment in new VAT registrations.”

Learn more about Amazon’s European FBA options.​

4

Outsource the filing of your taxes

Depending on the country in which you operate your Amazon Europe business, you will be required to file tax returns either monthly or quarterly. Outsource your VAT reporting to a European VAT provider instead of doing it yourself.

For Dan, “a competent VAT service should be monitoring your European sales and guiding you with any changes in your VAT duties as your company grows.”

Common mistakes to avoid

Don’t allow Amazon’s language requirements stop you from selling in Europe, even if they do necessitate some forward planning. For listing translation and customer questions, recall Bernie’s three-step structure. You’ll be able to extend your language capabilities as European sales grow.

Trying to figure out VAT yourself

If you’re not a tax expert, don’t even think about trying to handle this yourself.

If you’re planning to sell in Europe, Dan advises you to employ a European tax expert as soon as possible. It’s a lot of work to figure out VAT. It’s a waste of time and energy to try to decipher all of the information available online. Hire a VAT expert who has a deep interest in the subject and will ensure that your European taxes are properly managed.”

Asking your US accountant about VAT

Most accountants in the United States do not have a thorough understanding of the VAT. It’s not a good idea to even ask for general VAT advice from them.

According to Diana, “A lot of our sellers complain that their US accountant scared them away from selling in Europe because of the VAT. “Get in touch with a European tax expert.” Understanding your needs and options will allow them to provide you with better advise.”

Hiring a VAT expert who doesn’t understand Amazon in particular

Amazon Europe sellers have unique VAT regulations, and not all VAT specialists are aware of them.

According to a seller with a yearly European revenue of over $900,000, they employed a VAT specialist service in the past who seemed to lack specific knowledge of Amazon’s requirements. “In the long run, that was detrimental to our cause. It took us longer to collect tax information for them and they made more mistakes. There aren’t many VAT specialists who are familiar with Amazon’s business strategy, so look for someone who has done it before.

Ignoring or delaying your VAT registration

Your account may be temporarily or permanently suspended if this occurs. As soon as you realize that VAT registration is required, begin the process as soon as possible.

Lavina from the European Marketplace team warns that sellers risk having their accounts suspended if they accidentally ship inventory to the UK without the necessary VAT registration. Check your VAT status before shipping any inventory.

Frequently Asked Questions

VAT frequently asked questions from US selling partners
How do I know if I need to register for VAT in the EU?
The country in which your business is based, where your inventory is located, and the amount of sales you make all play a role in determining whether or not you need to register for VAT. As a general rule, VAT registration will be necessary in at least one EU country when selling products on Amazon.com’s European marketplaces. Take this short quiz to check if you need to register for VAT.
Where should I register for VAT and how do I register for VAT in multiple countries?

 

VAT registration may be necessary if you store, move, or sell products in numerous EU countries, depending on the amount of your distance selling. Customers in another EU country than the one where the products are held are referred to as distance sellers. As a result, you may have to file VAT returns in multiple countries. We recommend that you speak with a tax professional if you plan to keep products in more than one EU country or conduct distance sales because the requirements to register for VAT in numerous countries may differ.
I sell products into an EU country from outside EU (I don’t have a business establishment in EU) and I do not store goods in the EU. Do I need to register for VAT?
The tax authority where the items are imported may require import VAT (and perhaps import charge) if you bring them into the EU for resale. If you plan to keep your goods in an EU country, you must register for VAT.
What is the level of the VAT rates?

 

Tax rates for various commodities sold in the UK are subject to a wide range of variations. The current VAT rates are 20 percent, 5 percent, or 0%. Currently, these are the only options available. Please consult your tax expert if you are unsure which VAT rate to apply to your products, as the great majority of goods sold in the UK are subject to the 20% rate.

What’s next?

While expanding your business to Europe, VAT can be managed if you put in the time and effort. When beginning and expanding your Amazon Europe business in the region, focus on what really matters: minimizing the risk of VAT difficulties by following the four procedures described above.

 

Already selling on Amazon.com?

Expand to Europe

New to Amazon?

Get started