Are you an Amazon seller or running an Amazon account management agency? Do you want to grow your business and boost your sales without getting in trouble? If yes, then this article is for you.
Being an Amazon seller or an Amazon expert, there is one crucial thing you should know about. It is known as Amazon Valued Added Tax (VAT). A basic understanding of VAT is essential for you. It will not only help you grow your business but also avoid many problems.
So, stick around! This article provides clear and useful information about Amazon VAT. Let’s start with the basics and make sure you won’t need to go to an Amazon expert.
What is VAT?
VAT seems to be a difficult term, but we have simplified it for you. So, a Valued Added Tax (VAT) is a consumption tax that is applied to every step of the supply chain. You can say it is a tax on the value added to a product or service at each stage of production and distribution.
Now, you must be wondering why it is necessary, right? Well, it is a more efficient way of collecting tax. It distributes the tax burden to all levels of production and consumption. In real life, businesses add a tax called VAT to the price of things they sell. They then subtract the VAT they paid when buying things for their business.
Making sense? Let’s make it more clear.
So, there are two types of VAT that you need to understand as a business owner.
Input VAT is the tax a business pays when buying things. It’s important for businesses because they can subtract it from the VAT they charge when selling things. This subtraction helps businesses keep enough money on hand and handle taxes better.
On the other hand, output VAT is the VAT a business adds to the price when selling things. To find output VAT, businesses figure out how much money they make from sales. Then, they apply the right VAT rate and calculate the VAT they need to pay.
This article is for Amazon sellers, so output VAT is what you should keep in mind. Now that you know what VAT is, let’s shed some light on at what rate it is applied.
Guidelines of VAT on Amazon
Whether you’re an Amazon seller or an Amazon PPC expert, you must understand VAT. This is especially important if you are selling in countries where VAT is applicable. As Amazon operates worldwide, so sellers should be aware of the tax rules of each region.
Here is some of the information for sellers about VAT:
When selling goods within the same country, it’s important to charge the correct VAT rate. This ensures compliance with local regulations.
Cross-Border Sales Within the EU:
Selling within the European Union (EU) can be difficult when it comes to the tax rules. You need to go through diverse thresholds and regulations. Specific requirements vary by country, and sellers must stay informed about them.
Expanding beyond the EU means dealing with different taxes. Selling globally may involve following special tax laws, like import duties and local taxes. Sellers need to understand the tax rules in the countries they’re targeting.
For smooth compliance, sellers should keep up with changing VAT regulations. They can get professional advice from an Amazon expert or Amazon PPC consultant. Moreover, Amazon also offers a tool that is helpful in managing VAT. You will get to explore it in this article.
What are the VAT Rates worldwide?
The VAT rate is the rate/percentage at which it is applied. There are different VAT rates for different countries. It can also vary with the type of product or service that is being sold. For example, in the United Kingdom, the usual VAT rate is 20%, but there are minimized rates of 5% and 0% for certain products and services.
In the European Union (EU), VAT rates can vary from 17% to 27%, depending on the country. However, It is important to calculate the correct VAT rate for the country where the sale is taking place. It will help you ensure that you are charging the correct amount of VAT.
Here is a table of current VAT rates acceptable by the EU:
|Super Reduced Rate
This is the table (By Eurofiscalis) of VAT rates in Europe. In Europe, VAT rates can change. Tax authorities might change them due to any economic shifts or changes in government policies. So, it is important to stay informed to follow the tax rules.
Let’s move forward and see more about Amazon and VAT.
How to Calculate VAT on Amazon Sales?
If you are an Amazon expert offering Amazon account management services, you must know how to calculate VAT on Amazon sales. However, if you are naive, let us help you do the job.
Calculating VAT on Amazon sales can be a complicated process. It depends on various factors, including the country where the sale is taking place, the type of product or service being sold, and your VAT status. But don’t worry!
You can follow the steps given below to calculate VAT on Amazon sales:
Step 1. Determine the Applicable VAT Rate
First, you need to see what is the applicable VAT rate for the country you are based in. As discussed earlier, there are different VAT rates for different countries. Therefore, you can get help from the above table and find out what is the VAT rate for your country.
Step 2. Check the Eligibility
It’s crucial to review the tax rules in your area to know if you can sign up for VAT and add VAT to your Amazon sales. Your ability to do this depends on the tax rules that apply to you. If you’re officially registered for VAT, you must include VAT in your sales. But if you’re not registered for VAT, you don’t have to add VAT.
Step 3. Calculate VAT
To calculate the VAT on your Amazon sales, you just need to multiply the product or service price (excluding VAT) by the VAT rate. For example, if the price is $200 and the VAT rate is 20%, the VAT amount would be $40. So, the total amount you charge the customer would be $140. It’s important to get the VAT right to avoid penalties and follow the rules correctly.
Step 4. Keep a Record
If you’re registered for VAT, it’s important to keep records of the VAT you add to your Amazon sales. This makes it easier to fill out your VAT returns and follow the tax rules in your area. Keep copies of your invoices and receipts, and write down the VAT you charged and paid for each sale.
Did you see how easy it is to calculate VAT? Now, you don’t need to hire an accountant or an Amazon expert for this task. You know how to get it done. However, if you haven’t registered for VAT yet, don’t skip the next section.
How to Register for Amazon VAT?
If you are a seller on Amazon in places where VAT applies, it’s necessary to register for Amazon VAT. The process of Amazon VAT registration can vary depending on the country where the seller is registering. But don’t worry!
Here’s a basic overview of the Amazon VAT registration process
- Determine your Registration Requirements:
Where are you selling? You only need to register in the countries where you have exceeded the distance selling threshold (typically €35,000 or €100,000 in annual sales). If you are already VAT-registered in any EU country, it can affect your registration process and obligations.
- Gather your Documentation:
After knowing that VAT registration is needed, you must gather the required documents for its application. The documents may include the following:
- Business registration documents.
- Financial statements.
- Proof of identity for company representatives.
- Bank statements.
- Submit your Application:
After gathering the necessary documents, the next step is completing the application. It involves filling out an online form or submitting a paper application to the tax authority. Sellers will need to give specific details about their business. It may include their VAT number, contact information, and information about the products or services they offer
- Wait for Approval:
Once you have submitted the VAT registration application, you must wait for approval from the tax authority. The approval process may take several weeks or even months. It usually depends on the country and the number of applications being processed. However, you should keep tracking the progress of your submitted application.
- Provide VAT Certificate to Amazon:
After getting approval for VAT registration, you must show evidence of this to Amazon. You can either submit a copy of the VAT registration certificate. Or you can submit other necessary documents through Amazon’s Seller Central platform. Sellers need to verify that their VAT registration details are accurate and current.
- Fulfill your Ongoing obligations:
Once the seller has completed VAT registration, they must adhere to the local VAT regulations. These may include the following:
- File VAT returns regularly (typically quarterly).
- Maintain proper records of your VAT transactions.
- Pay VAT to the relevant authorities on time.
Whether you are about to become an Amazon seller or you are a current seller, you should understand the local VAT regulations. You can also hire an Amazon expert and seek professional assistance if you aren’t good at these types of things.
We will recommend you go for VAT calculation services by Amazon. If you haven’t heard about it, the next section is for you.
VAT Services Amazon
VAT Services Amazon is a complete solution for tax compliance. It is a cost-effective and convenient way to assist you in managing all aspects of VAT, from registration to filing returns. VAT services Amazon is in partnership with trusted tax service providers.
However, the service is offered in collaboration with tax service providers. It is currently available in the UK, Czech Republic, Germany, France, Poland, and Spain.
All you need to do is provide Amazon’s team with the data and documentation. They will ask for the information based on the countries you choose. The rest will be taken care of by them. There are plenty of benefits to getting VAT services on Amazon. Let’s have a look!
How does it work?
If you want to go for the VAT Amazon services, you can follow the steps given below:
Phase 1: VAT Registration
Step 1: Go to your Amazon Seller Central Dashboard, open the menu, and click Report > Manage your VAT.
Step 2: Click Start Now, and provide all the required information as per your location to register.
Step 3: Our tax service providers will review your VAT registration application. Once it is approved, your VAT numbers will be uploaded automatically into the seller central system.
Phase 2: VAT Filings
Step 1: Every month or quarter, as required, the tax service provider will prepare your VAT returns and share them for your review.
Step 2: If you have sales outside Amazon, you can upload these transactions on seller central. Amazon team will include these in your tax calculation and reporting.
Step 3: Once you have reviewed it, the reports will be submitted and generated to the tax authorities. You will only need to make the necessary VAT payments displayed on your dashboard.
Phase 3: Fiscal Representation
Step 1: If you are a seller outside Europe, you might need fiscal representation, which is included in the service.
Step 2: On Seller Central, you will also find the help pages to help you go through the process. Otherwise, you can get help from Amazon’s customer service.
You must have found the registration process very easy. The best thing is that VAT Services Amazon comes with a lot of other benefits as well.
Benefits of VAT Services Amazon
There are several potential benefits to using Amazon VAT Services instead of managing it yourself. A few of them are as follows:
Amazon handles the registration process on your behalf, saving you time and paperwork.
Amazon automatically calculates and submits your VAT returns. It eliminates the need for manual data entry and reduces the risk of errors.
You can track your VAT status, download reports, and manage invoices in one convenient location.
Reduced risk of penalties:
Amazon’s expertise and automated processes help cut the risk of non-compliance and potential fines.
Amazon stays updated on the latest VAT regulations and ensures your compliance accordingly.
You have access to Amazon’s VAT specialists. They can answer your questions and provide guidance.
VCS is beneficial for sellers who are not familiar with VAT laws. It also helps sellers who sell in many areas. VCS simplifies complex calculations and saves time.
Drawbacks of VAT Services Amazon
Here are some of the drawbacks of using VAT services Amazon:
- Limited countries: Amazon VAT Services are currently available in specific European countries.
- Fees: While potentially cost-saving, the fees can add up, especially for high-volume sellers.
- Less control: You lose some control over the VAT filing process by outsourcing it to Amazon.
- Limited customization: Amazon’s service may not cater to the specific VAT needs of your business. They won’t handle the complex scenarios.
Which Services are Exempt from VAT?
Amazon VAT exemption occurs when a seller on Amazon is not obligated to pay VAT on their sales. This can happen if the seller’s sales are below a specific threshold. Or if they are involved in activities that are exempt from VAT.
Services exempt from VAT can differ based on the country and jurisdiction. Generally, exempt services are those which are essential for the well-being of individuals or the economy. Common examples of exempt services may include the following:
- Healthcare: Medical treatments are VAT-exempt as essential services.
- Financial services: Insurance, banking, and investments are often VAT-exempt.
- Education: Tuition and materials from educational institutions may be VAT-exempt.
- Culture: Museums and public art events may be VAT-exempt.
- Public transport: Buses, trains, and subways as public transportation services may be VAT-exempt.
- Charities: Donations and volunteer work from registered charities may be VAT-exempt.
FAQs on Amazon VAT Management
Q. Does Amazon Charge VAT on Seller Fee?
Absolutely! In most cases, yes, Amazon charges VAT on seller fees. This includes common costs like monthly subscriptions, referral fees, and advertising expenses. The VAT rate applied depends on your registered business location.
There are a few exceptions, like specific fees for digital services in some countries. But generally, expect VAT to be part of the equation. It’s crucial to consider this in your pricing strategy. It will help you maintain healthy profit margins.
Q. Where Can I See the Amazon VAT Invoice?
Amazon issues VAT invoices for eligible purchases. As a customer, you can easily obtain one by following these steps:
- Visit the “Your Orders” page on the Amazon website or app.
- Identify the specific order for which you require a VAT invoice.
- Click or tap the “Invoice” button located next to the order details.
- If the order qualifies for a VAT invoice, a “Download VAT Invoice” link will be visible.
- Click or tap the link to download your VAT invoice.
Q. Can Amazon handle VAT payments and filings on my behalf?
Yes, Amazon offers services to assist with VAT compliance. For instance, the VAT Calculation Service can automate VAT calculations on your sales. Amazon offers partnered VAT service providers. These providers can help with registration and ongoing VAT management tasks. This includes tasks like payments and filings.
The services have extra costs. They aim to simplify the VAT process for sellers. It is important to test these services. Assess how well they meet your company’s needs.
Dealing with VAT can be tricky, especially on a big platform like Amazon. However, it is essential and plays a major role in Amazon PPC strategy.
Whether you are an Amazon seller or running an Amazon account management agency, Amazon’s VAT services are here to help and make things simpler for you.
With Amazon’s tools, you can easily register for VAT, figure out your taxes, create invoices, and keep track of what you need to report. Plus, you won’t have to worry about breaking any rules or getting penalties.
Whether your business is just starting or you’ve been selling for a while, Amazon’s VAT services are a great way to make things easier. Forget about confusing spreadsheets and tax codes. Use Amazon’s services and have more time to focus on growing your business.