As specialists in eCommerce accounting, we handle UK and EU VAT registration and submission services for hundreds of VAT for Amazon Sellers. One common question we always get asked is “What is VAT?” and “How do I know when to register for VAT for the country I am selling in?”
Let’s clear this up! The topic for this week’s blog post is VAT. I am going to uncover the basics of VAT and help you to understand what VAT is, whether are there any regulations you need to follow and how it can work to benefit you as an Amazon FBA Seller.
What is VAT?
To begin with, VAT which stands for Value Added Tax is a type of sales tax that is applied on goods and services you buy and sell throughout the UK and the EU. VAT is fundamentally comprised of two components: the Threshold and the Rate.
The threshold denotes when the company is required to be registered for VAT and is given by a figure of the company’s turnover. The rate denotes the percentage of tax to be added to the goods or services that the company sells.
You will need to remember that the rates and thresholds for VAT registration differ for each country in Europe, which I will explain further a bit later. For the UK the current VAT rate is 20%.
For example, if you are selling a product for £150 + VAT this then totals to £180. As it currently stands, the VAT threshold in the UK is £84,000. As a UK business you are liable to register for VAT when you are expecting to meet or exceed this mark in incoming sales per year.
If your company is VAT registered, you must charge VAT on your products or services. The benefit of this is that you can claim back the VAT that you have paid on expenses for your business.
As a VAT registered business you will need to report the amount of VAT that you have charged and the amount you have paid for products or services. You must declare this to HMRC through your quarterly VAT returns.
VAT for Amazon Sellers: How does VAT differ within EU countries?
Each country has particular rules and regulations that must be followed to avoid any penalty fees or in the worst case, by having your Amazon sellers account closed.
So if you are an Amazon seller in the UK wanting to expand to selling on Amazon EU or if you are already selling on these platforms, the following information is useful to know.
Fiscal Representation and Additional requirements
Here is where the process of VAT registration and submission can get slightly technical. You might have heard of the term Fiscal Representation, this is where a local entity (usually a local accountant) or acting body represents foreign traders for their VAT filings to that countries Tax Office. From the list of countries that we work with, France, Spain, Italy, Poland and The Netherlands all require Fiscal Representation.
For some other countries, further legal documentation may be required for example in Spain you would need to appoint a Power of Attorney to approve your legal documents which will then require a Hague Apostille Stamp.
How is VAT Calculated?
Each country within the EU has different taxation laws, where you will need to submit your declaration of VAT to the Tax Office on a monthly or quarterly basis. For the UK, you will need to declare your VAT to HMRC at least quarterly.
There are two main elements to VAT:
Input Tax – VAT that is charged by your supplier when your goods are imported into the country.
Output Tax – VAT that you would charge your customers when they purchase your products or services.
See the table below to see how often you will need to submit your data for each country.
|
Country |
VAT Declaration |
|
UK |
Quarterly |
|
France |
Monthly |
|
Germany |
Quarterly |
|
Spain |
Quarterly |
|
Italy |
Quarterly |
|
Netherlands |
Quarterly |
|
Czech Republic |
Monthly |
|
Poland |
Monthly |
Disclaimer: This will differ depending on your business model and the number of revenues your company brings in.
VAT for Overseas Amazon FBA Sellers (Non-UK, EU)If your business is based in the UK, you are not liable to register for VAT until your annual sales turnover exceeds the UK threshold of £84,000.
However, to benefit your business by being able to claim back on VAT for goods and services that you buy and sell, you can voluntarily register for VAT before you exceed the VAT threshold.
If you are an international corporation based in the EU and are looking to sell with Amazon FBA UK, which includes storing your products here in the UK, then you will need to immediately register for VAT.
This is an action you must take regardless of what your company turnover is.
Now, this is important… If your business is not based in the UK, you need a VAT number from day one of storing your products within the UK. This can be any number of products stored anywhere within the UK.
Regardless of whether you have imported your products or purchased them from a supplier in the UK, you will still need to register for VAT with HMRC regardless of whether you meet the threshold of £84,000 in sales turnover.
In some circumstances, your products may be eligible to be VAT exempt. You can check an up-to-date list of exempt products on the HMRC website.
VAT for Overseas Amazon FBA Sellers (non-UK, non-EU)
If you are an international corporation based outside of the UK and EU, you will immediately need to register for VAT from the day of your first sale or from the first day that you began to store your products in the UK. This rule applies regardless of what your annual turnover is or whether your annual turnover meets the threshold.
How our team at Sterlinx help you and your business
So as you may have gathered from reading this post, VAT can get quite complicated depending on where your business is based, who you are selling to and where you are storing your products.
At Sterlinx Global, we can assist you in making this process as smooth and as easy as possible. We specialise in Amazon Accounting for UK and Europe.
If you are an Amazon FBA Seller and would like further information regarding VAT within the UK and EU, get in touch and book a consultation with one of our highly trained specialists today.
