Correct logistics plan and VAT tax compliance operation in the European station
The challenge for all Amazon sellers in the European station lies in the reasonable matching of compliance operations and logistics plans. The tax issues existing in the European market are The essence is that overseas sellers who use warehouses in local European countries need to register a VAT tax number in the local country and pay taxes on time.
Amazon sellers can use the following two methods to operate the European market.
1. Self-delivery
After the seller places an order, it will be shipped from China and delivered to European buyers through China Post’s economic parcel or the four major commercial express channels. . Because no warehouse in a European country is used to store the goods, self-delivery does not require registering a VAT tax number or paying value-added tax.
2. FBA shipping
FBA shipping is a unique operating method for Amazon sellers. Because the European market can be sold in 5 countries at the same time, the logistics method is very important. The logistics methods of FBA shipments are divided into Pan-European plan and EFN (European Fulfillment Network)
The Pan-European plan is an important measure for Amazon to develop the European market, namely Pan-European.
This program allows Amazon sellers to ship products to any of the 5 countries in the European market. Then, Amazon will allocate the products to warehouses in the remaining four countries. When there are orders in the local countries, they can be delivered quickly, and this service is free for sellers.
Because of the Pan-European plan, many Amazon sellers’ European accounts were required to provide VAT tax numbers from 5 countries in 2017-2018. Because Amazon places its products in 5 European countries at the same time, it also uses local physical warehouses in 5 countries. So you have to pay taxes in the local country. From a practical point of view, registering VAT tax numbers in five countries requires a registration fee of up to 50,000 to 80,000 yuan, and you also need to pay taxes in these five countries at the same time on a regular basis. The VAT rate standard is generally 20% .
Before the pan-European plan, Amazon launched a logistics plan EFN for 5 European countries. EFN only requires sellers to place products in one of the 5 European countries. If there are orders from other countries , then Amazon will deliver the product from the country where it is stored to other countries, and cross-border logistics fees will need to be paid. Unlike the pan-European plan, Amazon will not place sellers’ products in warehouses in the remaining four countries.
Obviously, sellers using EFN only use one country’s warehouse, usually the UK’s FBA warehouse. The seller sends the product to a local warehouse in the UK. As long as there is an order, Amazon will deliver the product from the UK to other countries. To operate compliantly, you only need to register a British VAT tax number and pay tax once every three months. From a practical point of view, it is obviously the most economical way to register a tax number and pay taxes in one country in the UK.
The VAT rate in the UK is 20%. There is also a low tax rate (FRS) for small and medium-sized sellers, which is 6.5% in the first year and 7.5% in the second year. As long as the new seller meets the conditions required to register a VAT tax number and choose FRS, the tax rate will be calculated at 7.5% every year in the future.
New sellers need to meet the following three conditions to register for VAT tax number and choose FRS.
(1) Annual sales are less than £150,000.
(2) The value of imported goods per quarter is ≥250 pounds.
(3) The value of imported goods divided by sales volume ≥ 2%.
When new sellers on Amazon Europe initially operate in the European market, they must not only comply with regulations, but also reasonably avoid taxes.