Amazon FBA and VAT:
Tips to save some money

More and more Amazon sellers are now using the service Fulfillment by Amazon (FBA). Those who make use of this service let Amazon handle the entire logistics for them, including withdrawals when selling on the US marketplace. But if you think that you have nothing more to do with this service except manufacturing and advertising the products, you are mistaken. Especially the topic of taxes should not be underestimated.

Amazon FBA Sales Tax/VAT

There are many legal requirements and regulations to be observed with regard to value added tax (VAT). If you want to protect yourself from financial risks, you need to take a closer look at VAT compliance in Europe.

The first step, which has to be done before trading on Amazon, is to register the company at the tax office. In the future, incoming and outgoing sales must be regularly presented to the tax office. Further, the sales tax that is charged on the sales must also be declared. The same applies in the course of the input tax deduction for the naming of the VAT from incoming invoices.

If goods are sold not only in the home country but also in other EU countries, the respective company must register for VAT in each destination country and observe the local regulations. This regulation applies unless a registration for the One-Stop-Shop exists. You can find more information about the One-Stop-Shop for Amazon sellers on our blog.

Storage in Poland and Czech Republic leads to VAT liabilities

Those who want to benefit from the lowest FBA fees should store their goods in warehouses in Poland or the Czech Republic and send them from there.

To do this, the company must be registered for VAT in the respective countries – and submit VAT advance returns and other reports there accordingly.

It doesn’t matter whether a product is affected by it or a hundred and whether a cent is sold with it or many thousand euros. Either way, registration and pre-registration are required by law.

If the seller permanently stores products with the help of FBA in one of Amazon’s warehouses in another EU country, this delivery is exempt from VAT and is referred to as a delivery by the seller to himself. However, this does not exempt him from the obligation to record this delivery in advance VAT returns and in EC Sales Lists

It is further necessary to issue an invoice to oneself, a so-called pro forma invoice – and to note it as an intra-community acquisition in the VAT advance return of the recipient country.

Delivery thresholds in foreign countries

Until July 2021, when you reached the so-called VAT registration threshold when selling abroad, you had to register for and pay taxes abroad as well. These threshold varied from country to country. However, those who did not reach and fell below the delivery thresholds paid the taxes themselves as usual in the country of origin.

These were the previous country-specific delivery thresholds:

• Germany: EUR 100,000
• Belgium: 35.000,- EUR
• Denmark: DKK 280,000
• Estonia: 35.000,- EUR
• Finland: 35.000,- EUR
• France: 35.000,- EUR
• Italy: 35.000,- EUR
• Luxembourg: 100.000,- EUR
• Netherlands: 100.000,- EUR
• Austria: 35.000,- EUR
• Poland: 160.000,- PLN
• Portugal: 35.000,- EUR

The delivery thresholds used to refer to the annual net sales, including packaging costs and applied only to the sale of products to end consumers. Deliveries to companies in other EU countries were not affected.

In July 2021 the country-specific delivery thresholds were abolished in favour of an EU-wide threshold of 10,000€. This threshold is reached by B2C cross-border sales to all foreign European countries combined and, therefore, crossed much faster. Once it is reached, VAT registrations, returns, and the payment of VAT to the local authorities are mandatory in all countries to which goods are delivered.

Appointing a VAT accountant

In order to keep the overview and minimize the risk of missed transactions, many companies resort to the services of tax consultants, but depending on the turnover and number of sales, these services can quickly result in very high costs and decrease the overall margin significantly. An alternative to this is our hellotax VAT management tool.

Tax offices check the money and goods traffic

The tax office is anything but squeamish when it comes to offences. Concealing transactions is now severely punished – and the argument of not having known better does not count. Anyone who sells on Amazon is obliged to deal with the regulations and comply with them. Otherwise, severe penalties are to be expected.

Even with small turnovers it is not to be assumed that the tax office is not interested in it or could not notice it.

The tax offices regularly request information from Amazon about their sellers and obtain, for example, information about all companies that make at least enough sales to be required to pay taxes.

Other EU countries are also becoming inventive when it comes to tracking down possible tax fraudsters – whether consciously or unconsciously.

For example, in more and more EU countries, marketplace operators are being made responsible for ensuring that tax is paid and, for example, traders now have to prove to marketplace operators that they are registered for VAT. This can be done with the F22 certificate in Germany, for example, or with the VAT Certificate in the United Kingdom. The local regulations have always be observed.

Amazon FBA Tax Software

With the hellotax Amazon FBA tax software you can take care of you filings (Amazon FBA tax filings) and in general take care of all VAT tasks and everything related to Amazon FBA sales tax duties.

Summary

In order to be on the legally safe side with Amazon FBA in terms of taxes, the following topics must be kept in mind:

• Compliance with VAT,
• the delivery threshold or usage of the One-Stop-Shop
• the correct submission of various documents, such as VAT returns, on shipments or exports