Global Selling
How to handle VAT in Europe
What is VAT?
VAT stands for Value Added Tax and is a tax on the purchase of goods or services. It is collected on business transactions, imports and moving goods between EU countries. VAT-registered merchants in EU countries will add VAT to the price of the goods they sell and report to the national tax authorities at the time of tax return.
If you sell your products in one of the EU countries, you may need to register VAT (Value Added Tax).
If you sell your products in one of the EU countries, you may need to register VAT (Value Added Tax).
About VAT
There are 2 points that all non-EU-based sellers who consider selling in the EU should know about.
1. VAT will be generated for imports at the destination. When you ship your inventory to Europe (FBA, that is, to a fulfillment center if you are using Fulfillment by Amazon), you will have to pay the import VAT in that country.
2.VAT is included in the sale price. In the EU, VAT is included in the listed price. For example, suppose you are selling a product on Amazon.co.jp for ¥1,000 (excluding tax). To sell it for the equivalent price in the UK, you would list it on Amazon.co.uk for ¥1,200 (assuming 20% VAT). Consider this when analyzing pricing on Amazon Marketplace in Europe.
Some Sellers believe their customers or online marketplaces collect VAT and pay tax authorities for them. This means that when a VAT quarter is due, they have not collected and saved the VAT liability themselves and the payment has to be made purely out of profits. By increasing the price of goods, you can easily avoid this situation. This means that you need to know the tax rate of VAT to claim and include that VAT in your sales price.
1. VAT will be generated for imports at the destination. When you ship your inventory to Europe (FBA, that is, to a fulfillment center if you are using Fulfillment by Amazon), you will have to pay the import VAT in that country.
2.VAT is included in the sale price. In the EU, VAT is included in the listed price. For example, suppose you are selling a product on Amazon.co.jp for ¥1,000 (excluding tax). To sell it for the equivalent price in the UK, you would list it on Amazon.co.uk for ¥1,200 (assuming 20% VAT). Consider this when analyzing pricing on Amazon Marketplace in Europe.
Some Sellers believe their customers or online marketplaces collect VAT and pay tax authorities for them. This means that when a VAT quarter is due, they have not collected and saved the VAT liability themselves and the payment has to be made purely out of profits. By increasing the price of goods, you can easily avoid this situation. This means that you need to know the tax rate of VAT to claim and include that VAT in your sales price.
Where to register for VAT
If you store inventory in Europe you are required to have a registered VAT where your goods are stored. Most of the sellers who have expanded into the EU have chosen Germany or the UK as the storage location for their goods and the place to register for VAT. Here is the reason why:
- The demand for online shopping in Germany and the UK is the largest in Europe. In order to provide faster shipping options to more customers, stock in either country is important. Review the options for Amazon Europe Fulfillment and find the best fit for you.
- Mitigates the risk disruption with logistics due to Brexit.
- The information required for UK and Germany VAT are simpler than other European countries.
When the business grows and expands, further registrations for VAT might be needed.
4 steps for handling VAT
One of the most common issues we deal with is Sellers having their European accounts suspended because of issues with the local VAT authority,” says Diana of Amazon Global Selling. Knowing and planning your VAT obligations in advance makes it easy to avoid many of these issues.
1
Get expert guidance early on and understand VAT obligations
Given the complexity of VAT, and how different it is from sales tax in Japan, most sellers hire a European tax expert. Many VAT experts offer a free first time consultation service.
With the Amazon Service Provider Network, you can get the services of VAT professionals at a discounted price.
With the Amazon Service Provider Network, you can get the services of VAT professionals at a discounted price.
2
Develop a strategy and prepare for expansion into Europe
Many successful Sellers receive advice from VAT experts when they plan their strategy to expand into the European marketplace.
If you are planning to sell in Europe, start your VAT survey as soon as possible. Incorporate the advice of experts from the very beginning. VAT is involved from the very beginning of the strategy, including pricing and fulfillment.
The VAT rate applied to the price varies by country, product category, etc. Ask a VAT expert for the tax rate that should apply to the listed price.
One Seller says “Our products are priced differently by country. Because each country has different tax rates, we use an algorithm that incorporates national regulations on VAT. In most cases, we take into account additional shipping costs, VAT, exchange rates, etc., to match the final price in our country.”
Many Sellers who are based outside Europe use FBA to sell in Europe. FBA simplifies logistics and allows you to use Prime Badge and sell products across European marketplaces. Prime Badge significantly increases the initial sales conversion rate.
If you are planning to sell in Europe, start your VAT survey as soon as possible. Incorporate the advice of experts from the very beginning. VAT is involved from the very beginning of the strategy, including pricing and fulfillment.
The VAT rate applied to the price varies by country, product category, etc. Ask a VAT expert for the tax rate that should apply to the listed price.
One Seller says “Our products are priced differently by country. Because each country has different tax rates, we use an algorithm that incorporates national regulations on VAT. In most cases, we take into account additional shipping costs, VAT, exchange rates, etc., to match the final price in our country.”
Many Sellers who are based outside Europe use FBA to sell in Europe. FBA simplifies logistics and allows you to use Prime Badge and sell products across European marketplaces. Prime Badge significantly increases the initial sales conversion rate.
3
Start a business in Europe and adjust as it grows
Many European Sellers have a foothold in Amazon's FBA European Fulfillment Network (EFN). EFN allows you to store your products in one country. Therefore, while exploring business trends in European marketplaces, you can minimize costs associated with VAT registration, filing, and regulatory compliance.
If you sell in a marketplace other than the one country where your products are stored, you do not need to register in another country until you exceed the stipulated sales threshold. This way you can test the European market without worrying about registering for VAT in multiple countries at first. If sales grow as your business grows, we recommend that you consider fulfillment options such as Pan-European FBA .
* Due to the UK’s withdrawal of the EU, there are some changes to the above. Read more
A Seller says “The reason why we moved to Pan-European FBA is that it has the advantages of reducing shipping time and shipping costs. And with the growth of the business, we were approaching the sales rate that requires VAT registration in all 7 countries. After transitioning to Pan-European FBA, we saw a sales increase that justified the upfront spend on additional VAT registrations.”
Through Pan-European FBA, Amazon moves your inventory among seven European countries based on customer demand. This means the Seller must be VAT registered in all 7 countries.
If you sell in a marketplace other than the one country where your products are stored, you do not need to register in another country until you exceed the stipulated sales threshold. This way you can test the European market without worrying about registering for VAT in multiple countries at first. If sales grow as your business grows, we recommend that you consider fulfillment options such as Pan-European FBA .
* Due to the UK’s withdrawal of the EU, there are some changes to the above. Read more
A Seller says “The reason why we moved to Pan-European FBA is that it has the advantages of reducing shipping time and shipping costs. And with the growth of the business, we were approaching the sales rate that requires VAT registration in all 7 countries. After transitioning to Pan-European FBA, we saw a sales increase that justified the upfront spend on additional VAT registrations.”
Through Pan-European FBA, Amazon moves your inventory among seven European countries based on customer demand. This means the Seller must be VAT registered in all 7 countries.
4
Outsource the tax declaration
As you launch and grow your Amazon Europe business, tax filing will be required monthly or quarterly, depending on the country. Instead of managing your filings yourself, outsource them to European VAT service providers.
If you outsource to a good VAT service company, you can monitor sales in Europe. You can also be instructed when there is a change to your VAT obligations.
If you outsource to a good VAT service company, you can monitor sales in Europe. You can also be instructed when there is a change to your VAT obligations.
Common mistakes to avoid
To meet Amazon's requirements for using local languages, some planning is required before you start selling. That said, this is not a reason for hesitating to sell in Europe. When translating listings or responding to customer inquiries, remember the following 3 steps: Follow the steps related to language steadily as your business grows in Europe.
Trying to figure out VAT yourself
When selling on Amazon in another region, you must include your listings in the language of the target marketplace. For example, Amazon.de listings are listed in German. Additionally, when providing customer support, you must use the language of the target marketplace.
The first step is to use Amazon tools to help you translate your listings. If this is your first time translating your listings, try using the tools provided by Amazon. Amazon's product translation tools offer free machine translation or professional translation (at a per-word price). Supported languages are English, French, German, Italian, and Spanish.
The first step is to use Amazon tools to help you translate your listings. If this is your first time translating your listings, try using the tools provided by Amazon. Amazon's product translation tools offer free machine translation or professional translation (at a per-word price). Supported languages are English, French, German, Italian, and Spanish.
Asking your Japanese accountant about VAT
Most Japanese accountants are not VAT experts. Even if it is a general consultation on VAT, it is not recommended to seek advice from Japanese accountants.
Many sellers are hesitant to sell in Europe because they hear from Japanese accountants that VAT is complex. Consult with a European tax professional to correctly understand the requirements and options.
Many sellers are hesitant to sell in Europe because they hear from Japanese accountants that VAT is complex. Consult with a European tax professional to correctly understand the requirements and options.
Hiring a VAT expert who doesn’t understand Amazon in particular
Not all VAT experts are familiar with the requirements for selling on Amazon in Europe.
A Seller who produces USD$900,000 per year in Europe says: “The VAT expert services I used previously did not seem to understand business on Amazon very much. That ended up hurting us in the long run. We had to spend more time gathering tax data for them and they made more errors. Look for proven professionals who have processed VAT for companies opening on Amazon. Many VAT experts may not have a complete understanding of the unique business forms on Amazon.”
A Seller who produces USD$900,000 per year in Europe says: “The VAT expert services I used previously did not seem to understand business on Amazon very much. That ended up hurting us in the long run. We had to spend more time gathering tax data for them and they made more errors. Look for proven professionals who have processed VAT for companies opening on Amazon. Many VAT experts may not have a complete understanding of the unique business forms on Amazon.”
Ignoring or delaying your VAT registration
Failure to register or procrastination may result in a suspension of your account.
Some Sellers ship their inventory to the UK without the required VAT registration. This leads to the suspension of the account. Please be sure to get VAT registered before shipping your inventory.
Registration can take some time, so get started with VAT registration as soon as possible.
Currently, it takes approximately 10 to 12 days to obtain a VAT number in the UK. The processing time can increase during peak times.
Some Sellers ship their inventory to the UK without the required VAT registration. This leads to the suspension of the account. Please be sure to get VAT registered before shipping your inventory.
Registration can take some time, so get started with VAT registration as soon as possible.
Currently, it takes approximately 10 to 12 days to obtain a VAT number in the UK. The processing time can increase during peak times.
What’s next?
With some time and consideration, you can manage VAT while expanding your business into Europe. Follow the 4 steps above to avoid VAT related issues. And most important of all, focus on running and growing your business on Amazon in Europe.
This article is intended to give an overview of some of the key obligations when importing goods into the EU. They are not intended to be a comprehensive guide to importing, nor do they constitute tax advice. If you are unsure of your obligations, we recommend that you seek advice from either the applicable tax authority or an independent tax advisor.
