We recently considered the VAT obligations that sellers incur when selling through Amazon’s FBA service. We’ll now dig deeper into the specific practical realities involved. We will also briefly consider the various VAT compliance mechanisms available. It’s important to get to grips with these practicalities, as doing so will help ensure you avoid penalties and simplify your VAT compliance process as much as possible.
Where is the warehouse?
According to EU regulations, when your goods are stored in Amazon’s fulfilment centres for the sake of onward sale to customers, they are considered consignment stock. It’s not necessary to get into the precise technicalities, but the upshot is that you will be required to register for VAT in the countries in which those centres are located.
Amazon’s EU fulfilment centres are currently located in Czech Republic, France, Germany, Italy, Poland and Spain. Amazon will move your goods between all six of its centres in order to optimise fulfilment efficiency. Therefore, using FBA, entails an obligation to register in all six countries. There is also an FBA fulfilment centre in the UK, which could be relevant if you are selling to UK customers.
Practically speaking, once registered, you must file regular VAT returns in each country. It is important to note the specific deadlines, regulations and filing requirements of each country.
VAT on distance selling
Six VAT registrations in six different countries may sound like a lot. But we haven’t even considered VAT on the actual sale of goods yet.
By now, you’ll be unsurprised to learn there are a number of possible permutations. Many of these relate to the new EU e-commerce regulations that take effect from 1 July 2021.
Non-EU registered businesses selling through FBA
Firstly, who is responsible for charging VAT on e-commerce sales? From 1 July 2021, the onus for charging VAT shifts to the online marketplaces (including Amazon) themselves, in certain cases. Notably for our purposes here, when a non-EU registered business sells to customers in the EU via Amazon, then Amazon must charge and account for the VAT.
Note, however, that even in cases where the online platform is responsible for the VAT on sales to customers, the seller must still register for VAT in terms of the consignment stock regulations referred to above.
EU-registered businesses selling through FBA
What happens when the seller is obliged to manage VAT on sales made through FBA?
The new e-commerce rules are relevant in that case, too.
In terms of the distance selling rules already in place, once a seller exceeds the distance selling threshold set by a given EU member state, they are required to register for VAT in that country and charge local VAT. For example, if a retailer based in Germany sells goods to customers in France to the value of more than € 35,000 (the threshold set by France) then they are obligated to register for VAT in France.
Clearly, the process can be cumbersome and complex. In many cases, e-commerce retailers will have to register and account for VAT in several countries.
As an alternative, from 1 July 2021, e-commerce sellers can elect to take advantage of the new One Stop Shop mechanism. Using the OSS, sellers can file a single quarterly digital VAT return that accounts for all their distance sales VAT obligations across the EU.
Note, however, that the OSS does not affect your obligation to register for VAT in the countries in which your goods are warehoused.
Strategic VAT guidance
Vatglobal’s e-commerce VAT experts will ensure you choose the optimal VAT registration mechanism for your business. Our global team provides one point of contact for all your VAT needs. We also ensure you are always fully VAT compliant wherever you choose to do business.