Simplicity vs. Complexity: Managing VAT and Customs Compliance when using Amazon FBA
May 21, 2021
Amazon FBA has made Europe an accessible selling ground for many non-EU distance sellers and eCommerce merchants. However, while its storing and distribution facilities have made fulfilment simpler, complexities around VAT and customs obligations are still complex. It’s important to be aware of your VAT obligations, shipping and customs requirements so that your business can avoid penalties and stuck goods.
What is Amazon FBA?
Fulfilment by Amazon (“FBA”) allows sellers to store their goods in Amazon fulfilment centres. When a sale is made via the platform, Amazon then packs those goods and ships them to customers. Put simply, it is a complete supply chain solution for e-commerce retailers who sell through Amazon.
What are the VAT implications of Amazon FBA?
The FBA service involves storing your goods in several Amazon fulfilment centres held across Europe (currently located in Czech Republic, France, Germany, Italy, Poland, and Spain). A fulfilment centre also exists in the UK but with the UK’s departure from the EU this raises further complications for sellers based in the EU selling goods to the UK. Storing goods in Amazon’s fulfilment centres triggers immediate VAT implications, even before you make your first sale.
What triggers a VAT registration obligation?
Your business will need to register for VAT in each European country where you:
- Hold stock
Selling goods into Europe via Amazon FBA means you will be holding stock within Amazon fulfilment centres which means your company is required to register for VAT in each country it holds stock in.
- Meet the Sales Threshold (B2C)
If your company crosses the distance selling threshold, your company will need to register for VAT.
- Import Goods into the EU
If your company imports goods into the EU or the UK, you will need to register for VAT and possess an EORI number.
But I thought Amazon was handling my VAT?
Amazon may bear the responsibility for charging VAT on the sale of your goods; however, your company will still face the obligation to register for VAT if you use FBA or a similar service.
What VAT complexities does this present for your company?
- A single VAT registration is required when products are sold and shipped to customers in the same EU country in which the goods are being stored.
- Multiple VAT registrations may be required when products are sold and shipped to customers in EU countries in which the goods are NOT being stored.
- Large portions of VAT go unclaimed since each EU country has its own requirements.
- Filing multiple tax returns in several languages can lead to possible incorrect submissions resulting in non-compliance and penalties.
How to ensure VAT compliance when using Amazon FBA
Even for the most advanced VAT team, navigating the complexities of multiple VAT registrations is onerous, time-consuming, and administrative. If you are a small business, then the task becomes even more difficult. Outsourcing all logistics, customs, and VAT compliance under one roof is the simplest, most efficient, and most cost-effective way to tackle your EU and UK compliance obligations.
By outsourcing your VAT and customs compliance to re:TRADE your business can focus on expanding its reach, increasing sales and your global marketing efforts while we take care of:
- Documentation collection and submission for multiple VAT registrations.
- Recovery of import VAT and input VAT losses through your local registrations or via a 13th Directive VAT reclaim mechanisms depending on what is needed.
- Monthly, quarterly, or annual preparation and submission of data for VAT filings.
- Act as EU fiscal representative to assist with customs clearance and VAT registrations.
While your business selects Amazon’s FBA service to keep shipping and distribution simple, it makes sense to apply the same logic to handling your VAT, compliance, and logistics compliance under one roof too. Tying to manage these complexities in-house could lead to errors, penalties and disruptions within your supply chain and sales; hurdles that no growing business should have to deal with.
For any queries relating to post-Brexit trade, your supply chain or how to reclaim Import VAT, you can book a free re:TRADE Consultation.