If you are selling or considering selling on Amazon’s EU marketplaces, paying VAT is unavoidable and can lead to serious issues if it is not addressed.
Please read on to find out more about Value Added Tax and the importance of keeping your tax affairs in order.
What is VAT?
The Value Added Tax, or VAT, in the European Union is a general, broadly based consumption tax assessed on the value added to goods and services. It applies more or less to all goods and services that are bought and sold for use or consumption in the European Union. Thus, goods which are sold for export or services which are sold to customers abroad are normally not subject to VAT. Conversely, imports are taxed to keep the system fair for EU producers so that they can compete on equal terms on the European market with suppliers situated outside the Union.
Source – European Commission
What are EU VAT Regulations?
In the European Union, each member country is obligated by Value Added Tax. However, the actual VAT rate varies from member to member. Value Added Tax ranges from 17% in Luxembourg to 27% in Hungary.
Products that are imported from non-European Union countries need to comply with the EU VAT regulation and apply the VAT rate of the EU country that they are importing to. For example, if a seller is importing to France, they should apply the VAT rate for France.
To comply with EU VAT regulations, sellers have to register their VAT number in the country where they are going to be importing products to and pay the required Value Added Tax for that country.
Furthermore, in most European countries, customers would expect sellers to provide a VAT invoice along with their order. In Germany and Italy, buyers often request VAT invoices for valuable items. Additionally, if a customer makes a purchase as a business expense, they will require a VAT invoice to claim the VAT back from the government.
How can Amazon Sellers Comply?
Firstly, to sell goods into Europe, it is of paramount importance that you apply for an Economic Operator Registration and Identification Number (EORI), which provides a unique identification of shipments across all EU countries. If you do not complete this task, they will not be able to complete the Entry Summary Declaration statement.
Shipping to the UK? Your EORI number will start with the letters “GB”. If you already have a VAT number in the UK, the first 9 digit numbers of your EORI will be the same as your VAT number, followed by 3 digit numbers, which are usually 000*.
Secondly, as your company is not located in Europe, you must be VAT registered, you can’t enjoy the privilege of being under the VAT threshold. To register a VAT number in the UK, you can simply process it online here.
The standard VAT rate in the UK is currently 20%. Once you have completed your VAT registration, you must collect VAT on all of your sales, regardless of EU country and submit your VAT return to Her Majesty’s Revenue and Customs. This should usually be done every 3 months. You can submit it online here.
According to HMRC, a VAT Return should include the following information: Total sales and purchases
Amount of Value Added Tax you owe
Amount of Value Added Tax you can reclaim
What your Value Added Tax refund from HMRC is
If you only export to the UK, you only need to register a VAT number in the UK. However, if you are also selling to other EU countries and your sales exceed the Distance Selling Threshold in any 12 consecutive months, you must also register a VAT number in these countries.
The Distance Selling Threshold is a value in Euros established by each country within the European Union. The exact thresholds vary from country to country. In Germany and France, the threshold is currently €10,000 while it is €35,000 in Italy and Spain.
As for issuing VAT invoices, BQool can assist you with its EU VAT Invoice Generator. BQool is on hand to alleviate time-consuming tasks because we know how important your time really is!
* Economic Operator Registration and Identification Scheme: supporting guidance
This article was created and intended to be used as an information piece and should not replace the advice of a legal tax professional.