Many companies sell products on Amazon, but not all of them know how this affects their VAT obligations in the different countries where they sell, and how to remain VAT-compliant. Tax offices across the EU are making efforts to close VAT gaps, which means they’re getting stricter with both online marketplaces (like Amazon or eBay) and with individual sellers. Amazon is taking measures to ensure that sellers on the platform are tax registered. If they aren’t, sellers risk losing their accounts.
In this article, we’ll look into the different aspects of VAT compliance for Amazon FBA sellers who sell to customers located in the EU.
What’s Amazon FBA in the EU?
Amazon FBA (FBA is short for “Fulfillment by Amazon”) comprises three different order fulfillment solutions, where Amazon handles a part of the goods shipment and delivery instead of the sellers. This allows sellers to concentrate on business development, marketing and promotion, and customer service.
Let’s look into each solution.
1) Pan-European FBA
Amazon has a few marketplaces in the EU, like Germany, Italy, Spain, France and Poland. With their pan-EU FBA, you store your goods locally in each of these countries and therefore maintain excellent delivery times and avoid cross-border delivery fees. This, however, means that you have to register for VAT in each country, at least before the new EU VAT reform takes place (scheduled for July 1, 2021). The reform’s goal is to simplify tax compliance with a common OSS (One Stop Shop) scheme, allowing businesses to fulfill their VAT obligations in a single EU country. Additionally, if you have product listings on amazon.co.uk, you’ll need to handle VAT compliance for them separately.
2) Multi-Country Inventory (MCI)
The Multi-Country Inventory solution is very similar to the first option, but you can select the national marketplaces for which you want to enroll. This means that you’ll need to ship your goods to warehouses in each country in which you decide to have an Amazon listing, and complete your VAT registration there. Again, the changes after July 1, 2021 will affect this.
3) European Fulfilment Network (EFN)
The European Fulfillment Network allows you to store your goods in an Amazon FBA center, allowing Amazon to take care of the delivery process. You need to be VAT-registered in the country of the Amazon FBA center, and your customers will have additional shipping fees if you ship to other countries in the EU.
How will the new EU VAT package affect Amazon FBA sellers?
The new VAT package that the European Commission has scheduled for July 1, 2021, will impact Amazon FBA sellers who ship to customers in the EU in a number of ways. Let’s look at some of the most important changes.
First of all, the EU will roll out a new VAT system, called OSS (One-Stop-Shop). Its goal is to simplify tax compliance for companies selling goods or services to EU customers, and it inherits the currently existing MOSS (Mini-One-Stop-Shop) scheme, which covers only a limited scope of services. Amazon FBA sellers will be able to register for VAT in a single country, and declare its sales transactions in a single VAT return.
Distance selling threshold limits will be no longer applicable; instead of that, businesses will have a single EU threshold of €10,000. Under it, the VAT rules & rates of the origin member state will apply. Once they reach the limit, companies will need to apply the destination country’s taxation rules.
Goods that have a value lower than €22 will no longer be exempt from VAT
Goods that have a value lower than €22 will no longer be exempt from VAT, as they currently are. Online marketplaces such as Amazon will be liable for collecting and remitting VAT on goods of a value of less than €150.
All of those changes will greatly facilitate VAT compliance for Amazon FBA sellers who trade in the EU, but you need to be able to quickly adapt to these changes.
What to do?
We recommend e-commerce businesses to prepare for these new rules timely. For volume businesses, this means ensuring your IT systems and e-commerce software are ready to handle the complexity these new rules bring and provide you (or your tax accountant) with adequate data to file your tax returns.
At Fonoa, we have developed a platform that is ready for the future and automates all aspects of your e-commerce VAT obligations.
A digital one-stop shop for online retailers with standard integrations to the world’s leading marketplaces and e-commerce tools like Shopify, Woocommerce, Magento and Opencart.
What’s more, reach out to us and we can help you handle your tax registrations, tax filings and representation where needed.