Taxes when selling on Amazon19 August 2021
Marketplaces offer a great opportunity to sell abroad, but that also means different VAT regulations in different European countries. This was especially tricky before the One-Stop-Shop (OSS) regulation was introduced in the summer of 2021. The OSS makes it a lot easier to grow your business internationally through marketplaces. What do you need to consider now?
The turnover threshold
Before the OSS regulation went into effect, there was a so-called ‘turnover threshold’ per country. This was a set amount per country you exported to. You had to apply for a VAT number in the country where you went over the threshold. Fortunately, this has now been simplified as of July 2021. You can now divide it into the following:
1. There is one turnover threshold for all long-distance sales, which is 10,000 euros.
2. If you sell from multiple European countries you can file your return for all these countries through one declaration, the OSS.
3. You do not need a separate VAT number for the countries where you exceed the threshold for long-distance sales.
4. The recipient pays the VAT for the imported products. So you can no longer import products under 22 euros VAT-free.
5. For the marketplaces themselves, it is now mandatory to declare when a product is sold through them, but shipped from outside the EU directly to the customer. They must collect VAT on this. This applies to shipments of up to 150 euros, even if several products are in one box.
What if you use FBA?
With the OSS, you can use the tax portal of your country to file tax returns for all countries in which you sell above 10,000 euros per year. But if you use FBA and thus have your products shipped and stored by Amazon, there are two ways to deal with the VAT rules: the European Fulfillment Network (EFN) and Pan European Fulfillment (PAN). If you choose to arrange your own logistics, then that falls under Fulfillment By Merchant (FBM) and different rules apply when it comes to VAT.
European Fulfillment Network
The European Fulfilment Network enables Amazon sellers to store their inventory in one of Amazon’s warehouses and fulfill orders for the whole of Europe from this one center. You can choose between warehouses in England, Germany, France, Italy, and Spain.
If you’re a brand based in the Netherlands, there are currently no warehouses here, and you will need to store your inventory in Germany. Meaning that apart from your local VAT number, you will also need to have one for Germany. Because as a business owner, you will pay VAT in the country in which you sell goods and also where you store goods, as you’d be importing goods to another location.
Lastly, it’s worth noting that you could pay VAT or cross-border fees if Amazon sends your items to customers located in a country other than where your inventory is.
Pan European Fulfillment
Another logistic option Amazon offers is Pan European Fulfillment (PAN). You only need to ship your inventory to one fulfillment center, and Amazon takes care of the rest. It automatically sends your goods across its European Fulfillment network according to anticipated local consumer demand. Your goods will be stored in seven countries: Germany, France, Spain, Italy, Poland, and the Czech Republic. Because of this, you will need a VAT number in each of those seven countries and will need to file separate tax returns each year.
Fulfillment by Merchant (eigen logistiek)
For now, in order for Amazon to store your products, you still have to go abroad. That means you will owe VAT to the country of storage, whether you have Amazon do your shipping or arrange it yourself. Of course, you don’t have to choose to store your products in an Amazon warehouse. If you have your own storage space in the Netherlands and want to ship abroad from that location, with the OSS you will pay VAT to the Netherlands up to 10,000 euros, and beyond that, you will pass it on to your customers using local VAT rates.
Don’t forget about Amazon fees
When determining the ideal price for your product or service, consider VAT costs, cross-border fees, and Amazon’s sales commission. This commission is added to each sale that you make but depends on the product category and whether or not you use Fulfilment by Amazon or not.
Usually, companies would have to pay extra tax on these fees and reclaim them later. If you’re a Dutch company, Amazon is a foreign entity, meaning you can benefit from 0% VAT if you include a valid VAT number on your invoices.
VAT and the big picture
Taxes are not a fun topic, but they are part of doing business locally and internationally. But don’t let that discourage you from expanding your brand’s reach. Amazon has resources to guide you. Combine that with a bit of research, and you can master your tax situation in no time.