Don’t let EU VAT (European Union Value Added Tax) be a barrier to growing your business internationally. There are more than 500 million people in the EU, and Amazon is a quickly growing marketplace in Europe. Imagine if you got into Amazon US 10 years ago. Now is your chance to do the same in Europe!
What is EU VAT?
VAT, or Value added Tax, is a consumption tax paid in the European Union. If you are selling, or want to sell, in Amazon Europe marketplaces, you must have an understanding of EU VAT: how much you are required to pay and what your filing requirements are. We’ve compiled some must-know information about VAT for American Amazon FBA sellers who want to start selling on Amazon Europe.
What is a registration VAT number? Do I need one?
A VAT number is the unique number assigned to a taxable person or business. Each European country has their own VAT system and unique numbers. You may or may not need to register for more than one, depending on your sales and where your goods are stored. You can usually register online for a European Union VAT number but it may take several weeks to be processed, so keep this in mind. Selling without a VAT can result in hefty fines, so you want to make sure you get any necessary VAT numbers right right off the bat.
How often do I need to pay VAT or file VAT returns?
You will have to pay VAT and supply VAT returns (these returns say how much you owe) on the frequency required by the country you are paying. This could be monthly, bi-monthly, quarterly or annually depending on the country’s requirements. A country may even specify which day of the month to file so be sure to check on how these rules apply in your situation.
How much is EU VAT?
Each country has it’s own tax rate and it can vary by item so you will need to check on how much to collect for your product. For example, the UK Standard rate is 20%. If your product is not a special product which gets a reduced or zero rate, this standard rate of 20% is what you have to pay, as long as your product is in the UK and you are selling to someone in the UK or you are below the distance selling threshold.
The distance selling threshold applies to products crossing the border from one European country to another European country. If the number of products you’ve sold from one country to another in one calendar year exceeds the threshold, you will need to pay the VAT of the destination country. On the other hand, if your sales are lower than the distance selling threshold of the destination country, you will need to pay the VAT of the origin country.
Thresholds are determined by individual countries, so make sure you’re keeping track of all the countries your product is shipping to and their specific thresholds.
Here are some example distance selling thresholds (2017)
- UK – €82 489
- France – €35 000
- Italy – €35 000
- Spain – €35 000
- Germany – €100 000
- Complete list
So, if you are shipping products from the UK to France and your sales are below France’s distance selling threshold, then you would pay the UK VAT, following any UK invoicing requirements.
On the other hand, if you are selling goods from the UK to France and you are above France’s distance selling threshold, you would need to pay France’s VAT rate and follow France’s invoicing requirements. In this case, you would need to register to pay VAT in France once you reach the distance selling threshold. There also may be more paperwork.
Once you pass the threshold, you have an immediate obligation to register for VAT and pay, so keep close track of your sales. If you register too late, you can incur penalties and interest charges. You can view the country of destination in Amazon’s order information. If you sell on other platforms, you will have to add in those sales as well.
Say you have stock in the UK and Germany, and you are shipping goods to Germany from both warehouses. The items going from the warehouse in Germany to Germany would require Germany VAT. The items shipping from the UK to Germany would start adding up to Germany’s distance selling threshold. Below the threshold, you would need to pay UK VAT but above it, you would need to pay Germany VAT.
Figuring out how much VAT to pay sounds complicated. What if I have inventory in multiple warehouses and shipping to multiple countries?
To keep things simpler, you could elect to pay Germany VAT on all sales shipping to Germany from the beginning. Sellers can elect to pay the Standard Rate of VAT in the destination country at any time and this could make things simpler for you. Depending on the country’s rules, you could end up paying more or less with this method. You will need to figure out a systematic way to keep track of your taxes.
- Examples of Standard Rate of EU VAT (2017)
- UK – 20%
- Luxembourg – 17%
- Denmark – 25%
- France – 20%
- Italy – 22%
- Spain – 21%
- Germany – 19%
- List of Standard VAT rates and also what products get reduced rates: http://ec.europa.eu/taxation_customs/sites/taxation/files/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf
Do I need to supply a VAT invoice to customers?
Some customers, like in Germany and Italy, expect a VAT invoice, especially if the purchase was expensive. Although it varies by country whether it is required to provide a VAT invoice by law, often buyers expect one in any case. If a buyer asks for one, you must provide it. You will need to check which countries require invoices and which don’t.
Here are some examples of country requirements for VAT invoices:
- UK – not required unless requested
- France – required
- Italy – required
- Spain – required
- Germany – required
Should I include VAT in the sale price of my item?
When pricing your product in different countries, you will need to decide whether to include VAT in your price or charge VAT on top of your price. In Europe, often the VAT is included in the price but keep in mind that VAT is different in each country so if your price is standard across the board, you will have different margins depending on the country’s VAT.
Do I need to pay EU VAT when importing items?
You may also be subject to pay VAT upon delivery when you import your goods into the EU. You may also have to pay VAT if your goods are stored in a fulfillment center in one country and are shipped to a different country. This is because the EU assumes you are shipping these goods for your own use. Once you sell the item and collect VAT from the buyer, you can be refunded the VAT you paid when importing the item.
Are there any other documents I need to file?
If you are a high volume distance seller (you are above the distance selling threshold for 1 or more countries), you may need to file Intrastat declarations. Intrastat is an EU system that compiles intra-EU trade statistics. This can be very complicated and varies greatly by country.
This is all over my head! Can someone else help me pay VAT?
You can have a 3rd party service help pay your VAT for you. VAT can be very complicated so having some help from a professional is definitely recommended.
- Take EU VAT seriously and be proactive
- Understand the rules of each country or hire someone who does
- Know your limitations and don’t be afraid to ask for help
- Don’t let VAT inhibit you from reaching your sales potential
*This article is written for Amazon FBA sellers selling to consumers in the EU, not businesses. Viral Launch is not a tax authority. Viral Launch does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.
VAT Registration – GOV.UK. https://www.gov.uk/vat-registration
How VAT Works – Tom Fougerousse. http://tomfougerousse.com/how-vat-works/
VAT identification numbers – European Commission Taxation and Customs Union. http://ec.europa.eu/taxation_customs/business/vat/eu-vat-rules-topic/vat-identification-numbers_en
What is VAT – European Commission Taxation and Customs Union. http://ec.europa.eu/taxation_customs/business/vat/what-is-vat_en
Taxes & Regulations – Amazon. https://services.amazon.com/global-selling/taxes-regulations.htm/ref=asus_ags_reg_tax
E-commerce – 7 Steps to getting VAT right – Webinar by Accordance VAT. Recording Materials
International shipments and VAT – Webinar by Meridian Global Services. Recording Materials
VAT and international fulfillment options (MCI and EFN) – Webinar by Meridian Global Services. Recording Materials