How to Be European VAT Compliant on Amazon 2022

It’s great to have you here. We never cease learning. Keeping up to date with relevant information is key to staying on top in the industry. Being the best and acquiring professional knowledge is one of Chern & Co’s strategies in delivering superb assistance to our clients. Especially when it comes to tax compliance and European VAT obligations.

On the 5th of May, we were delighted to participate in the charity webinar by our colleagues at 4B company devoted to European VAT and eCommerce. Thus, we can wait no longer to share some relevant insights regarding VAT taxation in the UK and EU and their relation to the European Amazon market.

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Things to Learn about European VAT in 2022

VAT in the European Union was introduced as a successful attempt to create an EU single market and favour goods circulation across all EU member states. Brexit, however, established the rules under which goods are moving from the EU to the UK and otherwise. We are considering the UK and Europe VAT systems defining key points about each of the two and showing how to implement VAT in realia of e-commerce in Great Britain and the European Union.

Key Takeaways:

• VAT stands for value-added tax;
• VAT is levied on goods imported and being distributed in the EU and UK (including marketplaces)
• Both juridical persons and sole proprietors can submit VAT applications;
• There is no common VAT rate in Europe. Each country sets its rates independently. 
• The average VAT rate in the EU is 21%
• The e-commerce reform in the European Union and the United Kingdom was introduced as a facilitated way for the Revenues to control tax compliance of e-commerce businesses.

Important Insights About VAT Tax UK

Before we begin:

• The standard UK VAT registration threshold for resident companies is 85.000 GBP.  Non-residents must register BEFORE starting a trading activity.
• VAT returns can be submitted quarterly or annually.

Upon Value added tax registration, entrepreneurs can choose whether to register for a standard (20 %) or flat (7.5% or 6.5% during the first year of trade) vat rate scheme. 

A flat VAT rate does not imply a return on imports and can only be applied until your revenue from selling goods surpasses the 150.000 GBP threshold in a financial year. There are no strict guidelines on what scheme you should register for. Each company can choose what fits them best and change the VAT rate scheme “on the go”.

The Ecommerce Reform in Great Britain

The e-commerce reform introduced On 01.01.2021, brought in some serious changes that affect the current British VAT system. Here are the major alterations:

1. The £15 VAT exemption thresholds were cancelled (all imported goods, regardless of their value are subjects to VAT). This was implemented in a response to the actions of unscrupulous sellers, who deliberately underestimated the cost of imported goods in order to avoid taxation.
2. Goods the value of which does not exceed 135 EUR are subjects to a simplified customs declaration
3. Marketplaces are responsible for charging and reporting VAT obligations.

DOWNLOAD NOW –> Europe & UK Tax Guide 2022: VAT, Corporate Income Tax, and Personal Income

Import VAT Rates UK

The standard import VAT rate is 20%
For goods below 135 GBP (Vat included) the rules of IOSS apply
For goods over 135 GBP standard VAT rules apply
UK VAT can be paid with a card on the website of HMRC, bank transfer to HMRC, Payoneer, and Wise.

Import VAT Uk is charged upon imports of goods on the territory of the country. An importer obtains a certificate of VAT which they can use to claim an import VAT refund in the UK. The commercial cargo required Customs clearance before it arrives at Amazon FBA.

Delivered duty paid (DDP) – is a term used when a seller is responsible for shipping and customs clearance of goods prior to their delivery to Amazon FBA.

In some cases, collecting and paying British VAT is the responsibility of the marketplace. Check them out!

1. The goods under 135 GBP are sold from the warehouse outside the UK to the local buyers.
2. The goods are sold by a foreign company from a warehouse in Great Britain.

Are you a seller? MAKE SURE TO INCLUDE VAT INTO PRICES as Amazon will charge it automatically.

Important Insights About EU VAT

Before we begin: 

There are two cases when European VAT registration is obligatory:

1. Goods are stored in the warehouse in the EU (including Amazon warehouses). 
2. The return of EU-registered companies from selling goods on websites and marketplaces surpasses the 10.000 EUR threshold.

Ecommerce Reform in the EU

Just like in the United Kingdom, the eCommerce reform in the European Union imposed a few significant changes to VAT Europe. Here are the new vat rules 2021 in the EU:

• Cancellation of distance-selling thresholds and introduction of OSS system
• Сancellation of tax exemption for imports of goods under 22 EUR
• Tightening of responsibility of marketplaces for fraudulent activity of sellers
• Introduction of one common EU threshold of €10,000 above which the VAT must be paid in the member state where the goods are delivered.

Who Is Responsible for Collecting Vat in the EU?

1. Intra community trading: selling goods from EU warehouses to EU buyers – a seller.
2. When delivering goods from warehouses outside the European Union valued lower 150EUR – a marketplace.

Is your company located outside Europe? A marketplace will charge Value added tax in the following cases:

• Goods valued under 150 EUR are delivered to the buyer in the EU from a warehouse outside the EU
• Regardless of the value of goods when they are delivered from the EU-based warehouse

3. When delivering goods from warehouses outside the EU valued above 150EUR, a buyer will pay Value Added Tax according to the rates of the country where the goods are delivered.

Check out the tables below to take a more profound look at European VAT responsible persons depending on the location of company registration, the value of goods and where they are delivered from.

Where a company is registered	Where goods are delivered from?	What is the value of goods?	VAT-responsible body
Outside EU	Outside EU	Less 150 EUR	Marketplace
Outside EU	Outside EU	Over 150 EUR	Buyer
Outside EU	From EU	Any value	Marketplace

Where a company is registered	Where goods are delivered from?	What is the value of goods?	VAT-responsible body
On EU territory	Outside EU	Less 150 EUR	Marketplace
On EU territory	Outside EU	Over 150 EUR	Buyer
On EU territory	From EU	Any value	Seller

 European Fulfillment Network by Amazon

European Fulfillment Network is an option by Amazon that allows sellers to keep their goods at European warehouses. After Brexit, the free circulation of goods between warehouses in Britain and the European Union was stopped. 

Amazon announced the renewal of EFN between the United Kingdom and a few European Union member states (Italy, Spain, Germany, France) which starts in March 2022. Therefore, goods stored at British warehouses can be delivered to sellers located in the abovementioned countries.

So, Value Added Tax in European Union and Great Britain is a comprehensive and dynamic topic. The boom of eCommerce imposed a serious challenge on European tax authorities who had to react quickly and make VAT taxation efficient for governments and eCommerce sellers. Thus, eCommerce reforms in the EU and UK were introduced as a facilitated way for tax authorities to control tax compliance and prevent unscrupulous traders from avoiding taxation.

Be VAT compliant with Chern & Co

If you are looking for assistance with tax compliance, feel confident to contact us. Chern & Co offers VAT registration services in Ireland, Germany, and the UK, OSS and IOSS registration and filing, EU representative, and Responsible person services. We are a tax agent of 80+ companies!