VAT (Value Added Tax) has always been the biggest problem for many sellers on Amazon Europe (and other e-commerce platforms such as eBay).
According to the current laws and regulations of EU countries, all sales of merchants, including online sales, are subject to tax at the corresponding tax rate except for a basic tax-free amount. Due to the short rise of e-commerce and the incomplete corresponding laws and regulations of various countries, many sellers did not strictly declare and pay taxes in accordance with the tax law system in the previous Amazon store operations. In the past two years, European governments (especially the United Kingdom, Germany and France) have been gradually improving the collection of VAT, from legislation for e-commerce sales to requiring e-commerce platforms to share data and assist in the implementation of tax payment, step by step to strengthen the management and verification of e-commerce tax payment.
Since the VAT tax issue is imminent, the following is a detailed introduction to the relevant matters of VAT tax.
VAT is a post-sales value-added tax generally levied by EU countries, that is, a profit tax on the sale price of goods. According to the current tax rates of various countries, the VAT rates payable for different categories of goods are different. The tax rates of most goods are around 20%. As long as the sales entity sells goods in EU countries, it is necessary to register a local VAT number. After applying for the tax number, the seller needs to declare taxes according to the actual sales amount and the declaration process and time stipulated by the law.
Take the UK as an example. The UK tax law stipulates that sellers must declare VAT on a quarterly basis. Each VAT tax number needs to declare and settle the import and sales situation of the quarter to the UK Revenue and Customs (HMRC) every 3 months. All Import VAT (import tax) and Sales VAT (sales tax) generated under the VAT tax number in the quarter are declared quarterly. VAT = sales tax minus import tax. If the sales tax is greater than the import tax, the additional sales tax will be paid; otherwise, the excess import tax will be refunded.
The UK VAT tax number applied for by foreign persons or foreign companies will not generate local corporate taxes. They only need to declare and pay VAT. If the VAT tax subject incurs expenses in the UK, relevant documents can be provided as input tax deduction materials. For cross-border e-commerce sellers, tax refunds are mainly used to offset the current output tax. The premise of tax refunds is that the VAT tax subject correctly uses its own VAT tax number to declare and clear customs when clearing local imports.
If the tax refund conditions are met, there are two forms of tax refunds: (1) refund in the form of a check; (2) refund to the seller’s VAT account, and keep it as a balance to offset the sales tax when it is required to pay the next period. How should sellers declare and pay VAT?
According to the regulations of the UK tax department, VAT tax subjects can apply for tax refunds (import taxes) and tax payments (sales taxes) in two ways: (1) use the official online operating system of the UK tax department to declare by themselves; (2) designate a formal accountant to do it on their behalf.
For sellers who have not paid taxes before, according to the current actual situation, when declaring and paying VAT taxes, the tax department will recover the taxes owed based on the sales data shared by the Amazon platform. Therefore, an Amazon store with high sales may have to pay a lot of taxes.
In order to avoid high taxes, sellers can consider the following methods in VAT taxation. If it is a new seller account, just started selling in Europe, and has no tainted record, then just apply for a tax number in accordance with the above reporting requirements, and report and pay VAT on time every quarter.
Old accounts and large accounts in operation, if they have been strictly paying taxes in accordance with tax laws in previous operations, will naturally not be affected and can operate normally.
For accounts that have been in operation for a long time but have not paid taxes, regardless of whether they have registered for VAT. Tax numbers, they must be carefully considered. Sellers can consult their tax reporting agencies to verify the amount of taxes that need to be paid. Sellers can also use new accounts to follow the products in the original account, and report and pay taxes according to the legal tax reporting and payment requirements according to the sales of the new account.
No matter what, VAT payment is inevitable. Sellers who plan to stick to Amazon Europe for a long time and have not yet applied for a VAT number need to act as soon as possible (tax number application usually takes 24 weeks); sellers who have already applied for a VAT number should add the VAT number to the Amazon account background in time, and declare and pay it in accordance with the law to avoid being detected by the system and causing unnecessary trouble.