Amazon VAT: Complex tax aspects through international sales and storage

Amazon dealers and buyers are spread across the globe. On the one hand, this and on the other hand, the Amazon warehouses distributed around the world result in the most diverse forms of goods delivery and thus in many legal peculiarities with regard to value added tax. Amazon’s value-added tax calculation service is intended to remedy this situation. This article explains what needs to be considered.

Amazon FBA and VAT

By the market place character Amazon appears in purchase processes to a large extent as sales mediators. Amazon connects exclusively the supply with the demand. An actual purchase contract is concluded between the seller – i.e. third parties – and the Amazon customers. The trick is that Amazon does not assume any fiscal responsibility in this scenario. Consequently, the seller is responsible for issuing a correct invoice and for reporting the country-specific VAT and its payment.

The tax law aspects become even more complex as soon as international business relationships are established. Here, the seller is responsible for observing and complying with the relevant tax obligations in the respective recipient countries. For example, a trader based in Germany sells goods throughout Europe to Poland and the Netherlands. The warehouse is located in Germany.

In the past decade, as soon as the dealer exceeded the applicable delivery thresholds (usually around 35,000 EUR) for Europe-wide deliveries, tax law requirements arose. Country-specific delivery thresholds were replaced by a new, lower, EU-wide applicable limit in July 2021. Since then, tax requiremenets arise in all country to which a seller sends products as soon as his corss-border transactions exceed 10,000 EUR. For example, the trader is obliged to register a VAT identification number for Amazon Business in the respective countries and to pay the VAT in the country of delivery. An exception of this rule comes in the form of the One-Stop-Shop

The use of Amazon FBA makes tax interdependencies even more complex: By using Amazon’s warehouse logistics, Amazon dealers can ship goods from different warehouses across different countries. Detailed information and tips can be found in our detailed guide: Amazon FBA and VAT.

Amazon VAT Calculation Service

With the increasing internationality, Amazon merchants have activated the VAT calculation service option in their sales accounts. This calculation service is designed to handle the complex process of charging different VAT and to protect merchants from stumbling blocks under tax law. However, the Amazon VAT calculation service is not a protective shield for merchants. Despite the service and automated invoicing, tax loopholes can occur. Nonetheless, online merchants continue to use the calculation service to take advantage of the associated benefits, such as the display of net prices.

In the following some tax loopholes, which result from the use of the value added tax computation service, are briefly described:

• Exceeding the delivery threshold is assumed to be the default setting: The calculation service assumes that the delivery threshold has been exceeded, regardless of the net sales in the respective country. Thus the country-specific VAT is calculated and consequently the invoice is generated accordingly. In the past, this could have be problematic for the seller: First, because the online merchant may have be exempt from VAT in the country of delivery due to the low net sales and second, because there was no valid Amazon VAT identification number. The consequence: the issued invoice is not legally compliant. Since country-specific delivery tresholds were replaced by a lower EU-wide applicable one, it is fair to assume that the delivery threshold is crossed by every Amazon Seller.

• National tax law exceptions regarding the waiver of the delivery threshold cannot be represented by the Amazon VAT calculation service.

• Invalid tax numbers in reverse charge procedures for cross-border deliveries: Amazon’s automatic calculation service uses the VAT ID number stored in the account for buyers, regardless of the country of delivery. The reverse charge procedure is accepted in parallel. The problem here, however, is that buyers can have the goods delivered to another country, for example. As a result, the invoice address differs from the delivery address. Thus, the VAT identification number assigned to the Amazon buyer account is erroneously assigned to the purchase.

Amazon and the EU VAT number

In accordance with European regulations, Amazon levies an EU VAT on subscription fees and the sales fees for using the Amazon Marketplace as a distribution channel. In the context of Amazon’s charging of the EU VAT, there are important aspects that are relevant for online sellers. These are summarized below:

• Amazon charges VAT from sellers
  • even without a valid European VAT identification number.
  • with a residence in Europe.
  • who sell their goods on non-European websites.
• The applicable tax rate of the country in which the online merchant is domiciled is decisive for the amount of the EU VAT
• An EU VAT ID can be applied for in the respective country – also mostly online. Please note that the country-specific VAT ID creates rights and obligations of the respective country. These must always be observed.
• The EU VAT ID can be transmitted to Amazon via Seller Central. By transmitting the tax ID, the requirements for the reverse charge procedure are met.
• Amazon exclusively assumes the VAT calculation, provided that the VAT calculation service is activated. However, Amazon does not assume any responsibility under VAT law for this. This means that the online merchant is, for example, independently obliged to submit the VAT return.

Three variants of cross-border deliveries in online trade

There are essentially three different forms of cross-border deliveries in e-commerce, each of which is based on different tax regulations.

Deliveries to end users

The first variant is the sale and delivery of goods to private end users. As usual, sales are first taxed at the place where the company is based. Previously, only when the so-called delivery thresholds were exceeded you as a trader had to register a sales tax ID in the country where you exceeded the delivery threshold. In most EU countries, the delivery threshold was around 35,000 EUR. This was changed in July 2021. Sellers now have to register a sales tax ID in all countries to which they sell once the new EU-wide applicable threshold of 10,000 EUR is crossed by sales to all countries combined.

In Amazon’s VAT calculation service, however, this quickly leads to complications. As soon as a VAT ID is available in the destination country, Amazon automatically assumes that the delivery threshold has been exceeded. It is possible that this has not yet happened and the sales are still taxed in the country of origin. However, Amazon does not map such national exceptions.

Here it makes sense to rely on control software such as hellotax because it monitors the delivery thresholds for each country and notifies the user if they are in danger of being exceeded. Only in this case does a VAT ID registration become necessary and only after the threshold is exceeded does the goods have to be taxed in the country of destination.

Deliveries to companies

If goods are shipped to companies abroad, the so-called reverse charge procedure is often used. This can hardly be depicted by Amazon’s sales tax calculation service. If the buyers participate in the reverse charge procedure, Amazon’s tool only checks whether they are in possession of a VAT ID in the respective country, but not the local tax registration.

For example, if a buyer has a Spanish VAT ID, but orders the goods to a French address and the German retailer ships from a French warehouse, it is not a cross-border delivery. Due to the Spanish VAT ID, Amazon nevertheless assumes that the reverse charge procedure must be used.

In addition, Amazon no longer checks the VAT IDs of individual companies once they have been successfully confirmed. As a result, merchants with a large number of transactions in particular may regularly be contacted by the German Federal Central Tax Office to point out that their summary reports contain invalid VAT IDs.

Deliveries to third countries except Switzerland

If you sell goods to a third country as a merchant, the Amazon VAT calculation service correctly treats them as tax-free export deliveries. Since Switzerland is not part of the European Union, it is treated as a third country in this case. But: Unlike other third countries, Amazon cannot correctly map deliveries to Switzerland, as it has introduced an independent mail order system as of January 1, 2019.

Summary

Amazon FBA opens up international sales opportunities for online sellers. This gives sellers access to international buyer groups. However, cross-border deliveries give rise in particular to claims under VAT law, which must be met. Although Amazon offers sellers the possibility of taking over these claims with the help of the Amazon VAT calculation service, this can regularly lead to stumbling blocks and it is crucial to always meet all regulations – both from the EU and from Amazon.

Therefore, it is recommended to validate tax law aspects, including those which result in invoices, by means of FREE online tax software such as hellotax or to take over such services completely by. This ensures that any tax loopholes are avoided.