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Amazon European VAT Thresholds

Published on December 21st, 2011 | by Matthew Ogborne

19

3% of Sales Coming from the EU? Say Hello to the EU VAT Bomb

If your business has been happily taking orders from around the EU and even if this is as low as 3% to one EU country hot-spot for a £1M turn over business, then you could be sat on an awkward issue regarding VAT.

This was another one of those ‘ah-ha moments’, although quickly followed with ‘wtf’ and ‘omg’ that’s going to be fun. In this article I do my best (as I’m not an accountant) to bring this topic into plain English.

This is certainly an issue that hasn’t been highlighted to businesses from either Amazon or eBay to my knowledge and is quite concerning eBay has been in such a push for Cross Board Trade (CBT) in recent months with statements that it fuels half a billion export boom and pushing the international site visibility upgrades and featuring eBay UK listings on the EU sites.

Disclaimer

Firstly lets clear a few points:

  • #1 I’m not an accountant
  • #2 I’m not a VAT expert
  • #3 I’ll never be #1 or #2.
  • #4 If you are #1 or #2 or have experience of this topic with your business, then fell free to comment and I’ll amend this article accordingly as needed.

That said lets dig in and take a look a potentially nasty issue for medium to larger eCommerce businesses, because its really easy to go past the VAT limits, as they’re sooo low!

The UK VAT System

Starting from the beginning, VAT in the UK is pretty much a given. At around £73K of gross turnover or if expected to exceed this, a business is pretty much required to register to become a VAT tax collector and give the HMRC 20% of sales (and to be able to claim back the VAT on purchases and on expenses). This may not be technically correct, as there are deviants of this, but that’s the crux of it for most product based businesses.

So if you exceed or ‘expect to’ exceed ~ £73,000 of sales in one year, you normally need to register for VAT in the UK. Relatively straight forward so far. Yay!

The EU VAT Thresholds

Now this is where it can get nasty. As that expectation to exceed the threshold in the UK, also applies to business delivering products from the UK into the EU member states (called distant selling), but these states don’t all have such high thresholds when compared to the UK. In fact some of them are really low at around £30,000!

Lets say you’ve been happily running a £1M p/a business that uses the marketplaces and also a couple of other sales channels. As you’ve been processing your orders from the UK, in most circumstances you’ve also bee taking orders from a wide variety of countries outside of the UK too.

The shocking reality is that if as little as 3% of these orders have come from one of the EU countries such as Austria, Belgium, Cyprus, Estonia, Finland, Greece, Ireland, Malta, Portugal or Sweden. You have an issue

Each of these countries have a VAT threshold of €35,000 (approximately £30K), when you hit this threshold then apparently you’re then required to register for VAT in those countries locally.

VAT Thresholds For European Countries (Sept 2011)

Doing some homework prior to writing this article, I found this document on the European Commissions website under Taxation & Customs Union. The middle section shows the thresholds for each of the member states in this document and I’ve extracted this to form the table below and highlighted the thresholds in bold.

Member StateThreshold for application of the special scheme for distance selling
Belgium€35.000
Bulgaria70.000 BGN (€35.791)
Czech Republic1.140.000 CZ (€46.570)
Denmark280.000 DKK (€37.557 )
Germany€100.000
Estonia€35.151 
Ireland€35.000
Greece€35.000
Spain€35.000
France€100.000
Italy€35.000
Cyprus€35.000
Latvia24.000 LVL (€34.052)
Lithuania125.000 LTL (€36.203)
Luxembourg€100.000
Hungary8.800.000 HUF (€32.257)
Malta€35.000
Netherlands€100.000
Austria€35.000
Poland160.000 PLN (€40.293)
Portugal€35.000
Romania118.000 RON (€28.012)
Slovenia€35.000
Slovakia€35.000
Finland€35.000
Sweden320.000 SEK (€36.232)
United Kingdom70.000 GBP (€81.843)

Even with the approximation that €35,000 is £30,000, for a £1M p/a business, this is only 3% of sales and actually very easy to achieve by sheer accident into one or more of these countries.

Its reassuring to know that the more likely culprits to top the £30K limit such as Germany, France & Italy have a much higher threshold of €100,000 or approximately £83,000, although in some circumstances, this could also be easily achieved without a second thought.

Summary

The aim of this article was purely to highlight and bring this topic into a ‘plain English’ format. I hope I have done that successfully.

If you even suspect that you’re likely to approach these figures to any of the countries above in your trading year, then please consult expert advice, such as from your accountant.

PS: If anyone knows how this applies to Amazon FBA items that are held in say France or Germany, I’d love to hear from you and please post a comment in the comments section below.





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19 Responses to 3% of Sales Coming from the EU? Say Hello to the EU VAT Bomb

  1. I have just referred back to this table for reference and have found an error. Italy is actually only €35,000, not 100k.

    • Howdy Julius,

      Nice spot, Just updated :)

      Matt

      • It’s also in a calendar year too. Not sure if that is up there. My Amazon.it sales have rocketed since December. Last year I was under but it means I am going to have to either stop selling in a month to Italy from Amazon.it or raise my prices to discourage sellers sufficiently in the next week or so.

  2. RT @lastdropofink: 3% of Sales Coming from the EU? Say Hello to the EU VAT Bomb – http://t.co/6YDh64mc

  3. 3% of Sales Coming from the EU? Say Hello to the EU #VAT Bomb http://t.co/di1kbxnT <= Have you run into this as well?

  4. Bryn says:

    Hi

    I have no knowledge of France but in Germany if you have your goods in the German warehouse you have to register for German VAT. I got this from German-British Chamber of Industry & Commerce http://www.germanbritishchamber.co.uk. I can provide an email address for the tax manager there but dont want to post it here

    They also offer a service to register you and submit your returns. I did it for six months then withdrew as the admin was horrendous

    Cheers Bryn

  5. Dave Skirrow says:

    Evening!

    How about UK sellers using Amazon FBA in the US?

    I’m about to embark on this and I’m expecting the US authorities to want to collect sales tax somewhere along the way.

    Anyone have any ideas?

    • I did look into this briefly. It seems very complicated tax wise. I think the Amazon FBA warehouse is in Indiana so you are governed by their state tax laws. You would need to contact the Indiana state government. The other issues are regarding import / export duties etc.

      • Dave Skirrow says:

        Thanks Julius,

        Not found a proper answer on this yet but on first inspection it looks like if you use a fulfilment centre in the US you become liable for sales tax to customers who reside in the state that the warehouse is in. (along with any customers who live in states that the fulfilment centre has a physical presence in).

        Also looks like I might be liable for income tax in the state that the warehouse is in.

        It appears as though I ship directly from the UK and offer poor service (due to slow shipping times), or pay more tax and ship quickly.

        Only other option I’ve not explored is using a fulfilment centre in maybe Canada to ship to the US.

        Whether it’s different for Amazon or not due to the nature of their platform I don’t know…

        Beginning of a headache I think…

      • Howdy Julias, David,

        Just as a FYI.

        Its been confirmed that when an item is bought on Amazon from a 3rd party merchant, the 3rd party merchant is the record of sale, not Amazon.

        There was some confusion over this a while back, with an accountant deeming that Amazon was the merchant for both their own and 3rd party sellers. This isn’t the case and makes the maybe Tax piece a little easier.

        Matt

  6. I know when I spoke to HMRC, they had no answer for me. They asked me to contact the DTI. They had no answer. I then spoke with Business Link. They had no answer. The chamber of commerce (East Midlands) had a French lady working for them who contacted the French tax office. They had no definitive answer but just said to register for French TVA (Vat).
    As the location of the sale is from France to France, or Germany to Germany I assume that HMRC would not be involved. That is what they told me when I spoke to them back in 2010 when researching this. At the point of the goods being exported from this country the transfer of ownership is from the 3rd party FBA seller on Amazon.fr or .de to Amazon.fr or .de. As they provide Luxembourg VAT numbers then the sale is put in the EC sales list.
    For my sales from my unified accounts to EC buyers they are all subject to UK VAT as they are sold from a UK base and exported.

    The analogy used by the 1st tax expert in France was to imaging Amazon as a vast shopping mall where they ask many people to send their goods. Amazon hold them for a cost and when someone buys them they take an additional cost and if they don’t sell amazon takes fees too. For all the 3rd party sellers they host is a business model with lots of upside and no real downside.

    I have petitioned my Account Manager to get Amazon Europe to take on cross border tax experts to assist small businesses to grow instead of using their laissez faire approach without any success as of yet

  7. Yes the Intrastat minefield is just that. It’s an extra hoop to jump through every month. Apparently the exemption value is increasing to £190 I think this year. The Amazon issue is something I took nearly 6 months to get to that definitive answer and about 2 weeks of man hours. The information provided by that anglo french VAT expert was also agreed by a 2nd such anglo french vat expert (see below):

    Hi Julius,
    I agree with his assessment and would have said the same with sight of the Amazon invoices to you and answers to similar points I ask for clarification on earlier i.e. my reply would have been completely different. One can see why it is beneficial to use Amazon as an intermediary for sales to Europe for businesses of your size!
    Best Wishes.
    Nick

    I think from a point of view of authorities as long as you can provide proof that you have researched the issue thoroughly and have proof from at least 1 tax expert in the relative country then you can at least argue due diligence was completed.

    • Howdy Julius,

      I partly agree with the use of two local experts, however I am slightly concerned on what view the HMRC take on it, as its essentially money taken away from them and as such they could easily become “shirty”.

      I’ll make some calls today and see what I can uncover, as it would be very beneficial to have a concrete answer from the HMRC in relation to sales that go over the thresholds to specific EU countries for sales that are completed on both eBay & Amazon (and to see their view on localised FBA too).

      I’ll post back when I know more!

      Matt

      PS: I edited both your comments to add ‘blockquotes’, so that the quotes were more easily read (just in case you wondered where the formatting had come from)

  8. I have had several issues regarding this subject as I was one of the first Amazon UK sellers to set up on FBA France and Germany.

    I contacted HMRC for assistance. They were about as much help as a chocolate teapot. The DTI, Business Link and the UK Chamber of Commerce were all the same. I then took it upon myself to contact the French Tax Authorities (as I had set up my Amazon France FBA account 5 months before the German account). When they were not on strike they were also no help apart from sending me French VAT application forms. I then took it upon myself to speak to several English ex-pat accountants and VAT specialists in France. One was particularly good. He stated the following:

    Having had time to digest your situation and taking into account our various emails and telephone conversation. With the additional information that you have now supplied being the Amazon invoices, I no longer feel that a French registration is necessary in your circumstances.
    My reasons for this are as follows:-

    1. Amazon are based in Luxembourg not France.
    2. You do not deal with the client or supply them directly, Amazon does everything.
    3. It appears from the Amazon invoices that they are buying the product from you and are selling it under their own name.
    4. Amazon collect the funds and pay you direct less a commission they deduct.
    5. Amazon are using intercommunautal TVA (VAT) numbers on their invoices, hence they are 0 rating the ‘purchase’ from yourself.
    6. Amazon are holding your stock on a sales or return basis.

    I trust I have fully understood the situation and that this reply meets your requirements.

    Due to the above it was deciphered that for FBA France and Germany stock there was no need to register for VAT in those countries. Amazon take the payment from the customer then purchase the stock from me so they are in effect my customer. All sales on these sites are then included in the monthly or quarterly EC sales list.
    I have now opened up my UK Amazon account as a unified account. All sales on that platform are subject to UK VAT at 20% unless any of the sales to a specific country exceed the thresholds above. This is not happening yet and one way to use the Amazon UK unified account is a testing ground for products and if they sell well transfer the stock holding to France and German FBA.

    Another shock I received recently was Intrastat. If a seller exceeds 250k sales within a calender year they are liable to register for Intrastat. According to the lady on the helpline that entailed providing the government with details of all individual sales to each of the EC countries on a monthly basis, including the UK tariff code for each product. I mentioned to the lady that I was a small company with small staff but by virtue of Amazon FBA I had about 50,000 individual sales to the EC and that it would be impossible to go through each of these to provide the figures. After 10 minutes of debate she reluctantly asked me if all sales were under £130 (which they were). That meant that I could apply for all sales to be lumped together under one low value tariff. That still means that every month I have to go through Amazon and eBay reports, work out what sales went to each country, remove the VAT element, then provide the totals for each county to the government so they can be included in the UK trade figures.

    I must stress I am not an accountant or a tax expert but just wish to assist other cross country sellers. I am just passing on my own experiences of the above subject.

    • Hi Julius,

      Interesting point on Intrastat. After doing some research Intrastat is the what the Government uses to track the movements between goods between EU countries (member states).

      I’ve pulled a handy quote from this document that indicates why this is required:

      So why are statistics on the trade between Member States still collected if the EU is a Single Market? The simple answer is that, although the EU became a Single Market, it did not become a single economy.

      They’ve got a handly flow diagram that I’ve included below to help work out if this is a concern for your business or not and also to clarify this is only for “goods”, not services:

      If you’re sending over £250,000 to EU countries, then the About Intrastat page is here and also similar to VAT & importing, there is a lovely complex classification set to get your head around too. The main number for HMRC is quoted as 0845 010 9000, although the classification line is 01702 366077.

      After hunting around the associated sites for 20 minutes, they’ve very well hidden the exemption for the value of goods below £130, I just cannot find it. No wonder she was reluctant! (although I suspect there is a classification for other within a classification, as just 99 for other would be a bit lame).

      To add to this further, I was curious where such data would be shown to, so a very quick search found the publication hub for UK National Statistics and the jackpot is on this page under “UK Overseas Trade Statistics – UK Trade with the European Union” for which all publications can be found here.

      I must admit I was rather underwhelmed by the data, as its not broken down other than the root classifications. An example is the 01/10/2011 excel report found here.

      As for the Amazon comments, thats raised more questions than I originally asked! I’ll see what I can find out in the next week or so.

      Matt

  9. Matt,

    Preface by saying this can’t be construed as tax advise to anyone …but my understanding is as follows.

    VAT on distance selling to consumers is primarily governed by the location of the buyer. So to your question about Amazon FBA stock in Germany …well, if you ( the merchant of record ) sell over €100K ( that’s Gross or GMV by the way ) to consumers in Germany then you’re liable to German VAT on those sales. It isn’t a factor as to whether you fulfilled them from UK or Germany or your warehouse or Amazon FBA.

    I say this as a business that sells online across Europe – eBay, Amazon, Direct webstores – and who is registered for VAT in many of the major European countries to comply with these legal & VAT obligations.

  10. 3% of Sales Coming from the EU? Say Hello to the EU VAT Bomb:
    If your business has been happily … http://t.co/dR0lUZCH @lastdropofink

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