All you need to know about VAT in Europe
As a US selling partner on Amazon,
it is important that you understand the ins and outs of Value Added Tax or VAT if you plan to expand into Europe.
This guide is intended to assist by summarizing the must-know details about VAT in Europe.
What is VAT?
Value Added Tax or VAT is a tax on consumption.
VAT is charged on all business transactions, movements of goods
across EU borders and on imports. Before you can trade in the EU,
you will have to register as a VAT vendor.
All registered VAT vendors must charge the required VAT
on their products and then pay the collected tax over to the
authorities along with their return.
The difference between US sales tax and VAT
If you have been selling in the United States and plan to expand
into Europe there are a couple of differences that you need to know about.
When you sell to a US fulfilment centre
you don’t pay sales tax on the goods. When you export your goods to Europe
you will be liable for import VAT on the product imported.
In the US, sales tax is not included in the list price
and must be added when sold. When it comes to VAT,
the tax is included in the list price.
So, if you have a product that you want to sell for $200,
you would list the price at $240
assuming a VAT rate of 20%.
It is important to bear this in mind when you
analyse competitor prices on Amazon’s European markets.
Registering for VAT in the European Union
The sole responsibility of complying with VAT legislation in the EU
lies with the seller. Still, as an Amazon selling partner,
you can make use of their many resources. Amazon also provides its partners
with tools to assist with the registration and filing of VAT returns.
Falling foul of European VAT regulations
has serious consequences, it is therefore in your interests
to get professional advice
in this regard. You can approach
VAT registration from one of two angles.
VAT services on Amazon
Amazon has a number of tax professionals
that will ensure that your VAT registration, submissions
and filings meet all requirements in UK, Germany, Spain, France,
Poland, Italy and the Czech Republic.
The advantages of registering and filing through the Amazon
provided services are listed below :
🚀 Inexpensive – your first year of service is free. The service includes
registration and tax filing. You’ll pay €400 per country per year
from the second year and Amazon will take care of all of your filings
🚀 Filing are automated – the filings are fully automated
and integrated in Seller Central for all Amazon transaction.
🚀 Full customer support – Amazon help you through
your Amazon registration and through the process of filing online.
You’ll have full customer support every step of the way.
Third-party providers
Many Amazon sellers in the European market opt
to employ a European tax expert to help them. Some will offer
the first consultation free to help you to get going.
Some of these providers are able to assist
with both VAT and shipping services.
The VAT registration process
VAT registration can take a while so apply
for your VAT registration number at the same time
that you register for your EU seller account.
To register you will need the following documents…
- The Identity document, passport or driver’s licence
of the company’s legal representative. - The articles of association of the organization. These will include :
🚀 The names of all shareholders
🚀 The share percentage held by each shareholder
🚀 The private address of each of the shareholders
🚀 Each shareholder’s date of birth
- Certificate of business activities – you will have to provide
a copy of your business license or a certified certificate of good standing as issued by the
Administration for Industry and Commerce or the Division of Corporations
of your State. A certificate downloaded from the Internet is not valid. - Bank details – you will require an official letter from your bank.
The authorities will not accept an e-wallet. - Proof of identity of the second and third legal representatives
of your business. This may include identity documents,
birth certificates, utility bills, marriage certificate, mortgage statement
or an official employer’s letter containing the legal representative’s
full name, birth date and National Insurance number.
Where to register?
If you have a product stored in a European country,
you will have to register for VAT in the country where your goods are stored.
Most sellers new to the European markets start off
by storing inventory in the United Kingdom or Germany.
This is because…
- The biggest opportunities exist in these countries,
so you can satisfy more customers quickly from stocks stored
within these borders. Amazon Europe’s fulfilment options will reveal
the options that best cover your needs. - Having stocks in the UK and Germany
ensures that you have stock on both sides of Brexit. - VAT registration requirements
are simpler in these two countries than in other European states.
You can handle additional VAT registrations
as you expand your business into other European countries.
Frequently asked questions
When do I have to register for VAT in the EU?
There are three key factors that will determine
whether you have to register for VAT.
These are…
🚀 The country in which your business is established
🚀Your level of sales
🚀Where your inventory is stored
For more information use this Amazon resource.
Where in the EU should I register for VAT?
Many sellers store and sell product in several EU countries. You will have
to register for VAT in any country where you store goods.
In addition,
if you are distance selling
i.e. selling goods from one EU country into others,
you may have to register in some
of the countries that you’re selling into.
It is important to seek the advice
of a tax consultant to avoid tax compliance issues.
What are the VAT rates?
The VAT rates differ depending on the goods
that you sell. You should consult a tax consultant
on this matter before you start to sell.
Must I register for VAT if I sell goods into the EU without storing them there?
Sellers who import goods into the EU must pay
import VAT in the country into which the goods are imported.
If you store that goods anywhere in that country,
you will have to register for VAT.
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