Selling on Amazon’s European marketplaces like Amazon UK and the sites opens up major opportunities for your business growth.
But it also comes with the need to understand European VAT (Value Added Tax) and handle taxes properly.
If you get the VAT wrong, you risk fines, product seizures, or your Amazon seller account being shut down completely.
In this guide, we’ll explain everything you need to know as a seller about VAT when selling on Amazon in Europe:
In this guide:
VAT stands for Value Added Tax. It is a consumption tax charged to Amazon sellers for most goods and services sold in the UK and EU.
VAT is similar to sales tax in the US, in which sellers must collect and remit to state tax authorities where they have a nexus.
Every country in the EU has its own VAT rules. But here’s how it usually works:
Each business collects sales VAT and remits it to the respective country’s tax authority. They can also reclaim the VAT paid on business expenses. This input VAT is deducted from the output VAT collected.
For example:
So, while consumers ultimately pay the VAT, it passes through the entire supply chain with businesses responsible for collecting, reporting, and remitting applicable VAT.
VAT registration is required in each country where a business has a taxable presence based on factors like inventory storage, company registration, distance sales thresholds, and more.
There are some key ways that VAT in Europe functions differently than sales tax in the US:
| Feature | VAT in Europe | Sales Tax in the US |
|---|---|---|
| Payable on Import | Required for inventory shipped to EU | No sales tax on goods sent to US warehouses |
| Inclusion in Sale Price | VAT is included in the list price of the product in the EU. | Sales tax is added to the list price in the US. |
| Impact on working capital | Import VAT may lead to a substantial initial cash outlay for non-EU-based sellers. | No sales tax is paid until the final product sale in the US. |
| Distance selling thresholds | Each EU country has a threshold for sales from abroad. Exceed it, and you must register for VAT in that country. | There are no similar rules for US sales tax. |
Distance selling occurs when a business sells and ships goods from one EU country to an end consumer located in another EU country.
For example, a company based in France ships products directly to customers in Germany. Or a UK business mails orders to buyers in Italy.
Distance selling has increased exponentially with the rise of e-commerce and cross-border trade. This has created challenges for EU tax authorities regarding VAT collection.
It would be administratively infeasible if they had to collect VAT from every business shipping goods internationally.
But if they didn’t collect VAT from overseas sellers, it would be a disadvantage for domestic companies who have to charge VAT. And less overall tax would be collected.
To balance these factors, distance selling thresholds were implemented.
Each EU country sets a distance selling threshold amount for inter-EU trade:
For example, let’s say the current distance selling threshold is €10,000 for all EU countries. When you, a UK-based business, exceed the €10,000 selling threshold or expect to exceed it in the next 30 days, you must register for German VAT and file returns regularly.
Before you meet the distance selling threshold, you can charge VAT at your local rate.
Once you have registered for VAT in the destination country, you need to collect VAT at the destination country’s rate.
Distance selling thresholds aim to balance several factors:
Without distance selling thresholds, tracking and collecting VAT from all sellers shipping
internationally would be near impossible. This system aims for a pragmatic compromise.
Here are some tips for Amazon sellers managing distance selling VAT obligations:
Distance selling VAT can be complex but is manageable with preparation and the use of expert help. Staying on top of your obligations will allow you to expand internationally without hassles.
It can be tempting not to worry about VAT if you are a smaller seller. But it can carry big risks.
While you may get away with it initially, tax authorities ramp up enforcement against non-compliant overseas sellers.
Crackdowns are happening across all e-commerce platforms as governments aim to collect owed revenue and level the playing field for domestic sellers.
HMRC has been aggressively pursuing overseas Amazon sellers who have not properly registered for VAT in the UK.
Failure to satisfy HMRC’s requirements could result in Amazon suspending your selling privileges until issues are resolved.
Additionally, when any inventory enters an FBA warehouse in the UK, you have established a taxable presence there and must register for VAT. There is no threshold – VAT registration is required immediately.
The risks of ignoring this obligation include:
With the time and money invested in selling internationally, protecting your Amazon business by getting VAT-compliant is strongly recommended.
Note: If you ship inventory into UK FBA warehouses or exceed the £70,000 UK distance selling threshold, you must register for a UK VAT number.
There is no threshold if inventory is stored in the UK – you must register for VAT immediately.
You don’t need to establish a local UK or European company to sell on Amazon in those markets.
As a non-EU seller, you can:
Setting up a local EU or UK company has advantages, like potentially faster VAT processing. But it also means:
For most Amazon sellers, remaining a non-EU seller simplifies things greatly. Just be VAT compliant.
VAT rules vary across the UK and Europe. Here are the standard VAT rates and thresholds to be aware of:
| Country | Standard VAT Rate | EU Distance VAT Threshold |
|---|---|---|
| Austria | 20% | € 35,000 |
| Belgium | 21% | € 35,000 |
| Bulgaria | 20% | BGN 70,000 |
| Croatia | 25% | HRK 270,000 |
| Cyprus | 19% | € 35,000 |
| Czech Republic | 21% | CZK 1,140,000 |
| Denmark | 25% | DKK 280,000 |
| Estonia | 22% | € 35,000 |
| Finland | 24% | € 35,000 |
| France | 20% | € 35,000 |
| Germany | 19% | € 100,000 |
| Greece | 24% | € 35,000 |
| Hungary | 27% | € 35,000 |
| Ireland | 23% | € 35,000 |
| Italy | 22% | € 35,000 |
| Latvia | 21% | € 35,000 |
| Lithuania | 21% | € 35,000 |
| Luxembourg | 17% | € 100,000 |
| Malta | 18% | € 35,000 |
| Netherlands | 21% | € 100,000 |
| Poland | 23% | PLN 160,000 |
| Portugal | 23% | € 35,000 |
| Romania | 19% | RON 118,000 |
| Slovakia | 20% | € 35,000 |
| Slovenia | 22% | € 35,000 |
| Spain | 21% | € 35,000 |
| Sweden | 25% | SEK 320,000 |
| Switzerland | 8.1% | N/A |
Registering for VAT before meeting the standard turnover threshold has benefits and drawbacks. Let’s look into it:
So, in summary, voluntary registration has some advantages but also increases administrative burdens.
Weigh these pros and cons for your specific situation before deciding to do early VAT registration.
Amazon sellers have three main ways to file VAT returns – self-filing, using a tax agency, or using Amazon’s VAT Services. However, each has its own pros and cons.
Register and submit VAT returns to each country’s tax authority.
You can do it manually by visiting each tax website and submitting forms or automatically through 3P accounting software.
EU also introduced a One Stop Shop (OSS) and Import One Stop Shop (IOSS) systems in 2021 to simplify VAT filing across the EU.
OSS allows sellers to file one VAT return for all EU sales. IOSS does the same for goods imported into the EU below €150. However, OSS and IOSS have limitations on which countries are included and maximum shipment values, so they may not apply to all situations.
The main benefits of self-filing are that it is free, can be automated to save time, and gives you full visibility into your finances.
However, the main drawback of this method is it’s time-consuming, risks errors as tax laws change, and you may pay more tax than using optimization strategies from professionals.
Rather than self-file, you can hire an accountant or tax agency to manage VAT compliance. They will handle registrations, calculations, and filings in the required languages for each country.
This saves time for your business, ensures accuracy and compliance with the latest regulations, and avoids language barriers. The main drawback, however, is the cost of paying for their professional services.
Tax agencies often have ways to minimize tax obligations legally and can consolidate filings across countries into one relationship. This simplifies compliance as you expand into more EU markets.
If you sell primarily on Amazon, you can use their VAT Services to manage registrations and filings. One-time fees cover registration and an EORI number in the UK and one EU country.
Recurring monthly fees start at €33.30 for one country. Fees rise as you add more countries, up to a maximum of €142/month for seven countries. This includes all required VAT and Intrastat filings. Extra fees apply for fiscal representation.
It helps to keep the tax management within Amazon, only paying for what you need as you scale to new countries and leveraging Amazon’s registration technology and support.
However, there are downsides, such as costs and the fact that sellers don’t want to give Amazon their sales data from other channels.
The best option depends on your specific situation. Smaller sellers operating in one marketplace may find self-filing the cheapest and easiest method.
Larger sellers expanding across the EU will likely benefit from the consolidated compliance and optimization of a tax agency or VAT Services on Amazon.
When deciding, compare costs against each option’s time savings and potential VAT reductions. Also, consider which provides the right balance of control over your data and simplifies the filing process as you grow your business.
Testing different options can help determine the best fit. For example, you can start with self-filing or Amazon VAT Services for one country and switch to a tax agency as you scale across multiple countries.
Whatever solution you choose, ensure you fully understand your VAT obligations, registrations, calculations, and deadlines to remain compliant as your e-commerce business expands.
You may not need to register if you are below the distance selling thresholds. But there are risks to continuing selling without VAT:
We recommend registering for VAT once you sell in Amazon UK or EU markets. The thresholds are not that high, and getting compliance right from the start avoids bigger issues down the track.
If you are a UK business selling on Amazon, you have likely been charged 20% VAT on top of your Amazon seller and FBA fees.
However, as a VAT-registered business, you are entitled to reclaim this VAT that Amazon has charged. This can result in significant savings over time.
You must be one of the following to reclaim the VAT on fees:
To determine the amount of VAT you can reclaim:
For example, if your total Amazon fees over 4 years were £48,000, the VAT charged at 20% would be £9,600.
Follow these steps:
Learning the basics of VAT is essential if you plan to access the UK and European markets via Amazon.
While VAT seems complex initially, with the right help, it becomes a background process.
The key is acting early – getting expert advice, registering for VAT promptly, and outsourcing filing to specialists. Avoid playing catch-up down the road when issues arise.
Be sure to claim back VAT where possible. This provides additional capital to reinvest in growing your business.
While each country has nuances, the overall process becomes routine over time. You’ll be able to focus on sales and expansion rather than tax worries.
Don’t let VAT complexities deter you from accessing the lucrative UK and EU consumer markets. With preparation and support, you can confidently enter these regions and scale your business successfully.