While the e-commerce field is rapidly growing, selling online looks like a tempting business. Opening your own e-shop, or creating a new account in a different marketplace, definitely looks like a great opportunity. Without any doubt, becoming an online reseller might be your chance for a lucky break. Before starting, you need to know all circumstances about selling on a certain sales channel. Despite if you are currently working with Amazon or just considering it, you need to know all their selling policies. For that reason, in this article, we will explain about Amazon VAT (added value tax) policy in 2018. We will examine what is VAT, how it affects Amazon sellers and how it should be paid.
What is VAT?
First of all, we should be clear about the definition of value-added taxes. It is a consumption tax placed on a product whenever a value is added at each stage of the supply chain. For example, making a coffee also includes owning coffee beans. In other words, production to the point of sale. What is important that the amount of VAT that the user pays is on the cost of the product.
EU law requirement is that standard rate must be at least 15% and the reduced rate of at least 5% (for supplies of goods and services referred to in an exhaustive list). There are certain variations between EU countries, which depends on the different type of products. Also, there are other rates for specific products.
- How to apply VAT?
Companies which works with VAT system have to register their business for VAT purpose.
It is obvious that working with one most of the popular marketplace – Amazon, will upgrade your sales growth. Despite that, you should be aware of all kind of reglaments related to taxes.
Why Amazon UK VAT became necessary?
HMRC (Her Majesty’s Revenue and Customs is the non-ministerial department of the UK Government responsible for the collection of taxes) decided to prevent their country from fraud and tax loss. According to them the tax loss from VAT fraud was £1.5bn in 2016/17. Also, they were disappointed that Amazon was still not seizing sellers’ stock or freezing funds for not registering in VAT. In this manner, HMRC is creating a fair marketplace for all Amazon buyers and sellers. Moreover, it increases income to the UK.
Certain Amazon EU VAT fees. Amazon calculates and collects EU VAT on monthly subscription fees and Selling on Amazon fees related to sales by sellers, which:
- Sell on a non-EU website
- Are residents of an EU countries
- Do not have EU VAT registration number
Amazon UK VAT. From 2018 March 5th The UK Finance Bill 2018 required to block Amazon sellers, which do not follow UK VAT registration requirements. UK sellers also have to register for VAT –
- if they are selling in EU, when:
- goods are stored in the UK
- sales exceed the UK distance selling VAT threshold of £70,000
- sell to UK-based consumers (non-business)
- if selling only in the UK, when:
- goods are stored in the UK
- sales exceed the UK domestic VAT threshold of £85,000
- sell to consumers based in the UK
Amazon VAT rates
As mentioned before, VAT rates usually depend on a certain country or product type. Amazon works in the same manner, relying on the location of the customer. For example, there are different rates for the sale of digital products and services (ESS-Electronically Supplied Services) – Amazon ESS VAT rates.
- Amazon VAT calculation service. Benefits:
- Amazon Business. As soon as you activate VAT calculation service you automatically become an Amazon business seller.
- B2B sales growth. Being an Amazon Business seller increases your B2B sales up to 50%
- VAT. registration number(s). All VAT numbers associated with the countries where you ship from, where your business is registered and where are your distance selling obligations
- Automated Amazon
While Amazon VAT calculation service might help you with taxes, a management software will fulfil your multiple orders. Multiorders, eliminates time-consuming tasks (tracking updates, multitasking through different websites, inventory details), as well as allows integrating different sales channels, managing multiple orders and making faster business. Amazon integration:
- Inventory management
- Connect with other sales channels
- Shipping & tracking
- Track your profit
Overall, being an online seller does not excuse you from the societal rules of taxation. This fee is collected on business transactions, imports and moving goods between EU countries. Although, Amazon has created VAT calculation service, which also creates additional benefits. To simplify your business, even more, use a management software- Multiorders. Which automates your shipping, inventory management, tracking and fulfil your orders.
Senior Copywriter at Multiorders
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