VAT compliance is a challenge for any E-Commerce seller and online shop owners, no matter which country they come from or operate in. However, selling and shipping products to customers in a variety of countries in the EU puts an additional burden on entrepreneurs when it comes to VAT duties.
That’s because the landscape of VAT regulations in the European Union is broad, with some laws being country-specific and others applying across the EU. An example of the latter is the introduction of some overarching measures in July of 2021, like the One-Stop-Shop (OSS).
The measures are supposed to prevent tax evasion, minimize arbitrage opportunities, and simplify the process of VAT compliance for both foreign and EU online sellers active within the European Union.
A special case of online entrepreneurs is, of course, Amazon FBA sellers. They not only sell and ship products to customers in several countries but also tend to store them abroad as part of their participation in Fulfilled-by-Amazon programs. Through storage in other countries, they are subject not only to the general regulations but also to some exceptional additional duties.
Ahead we explain the currently applying regulations concerning VAT in Europe and E-Commerce and focus especially on the rules that apply to Amazon FBA sellers.
EU-wide applicable delivery threshold
One of the most important changes in 2021 was the abolishment of country-specific delivery thresholds for B2C distance sales in favor of an EU-wide applicable, smaller one.
The former thresholds ranged between 35,000€ and 100,000€. Once an Amazon seller’s deliveries to customers in one country exceeded that country’s threshold, they were required to register for VAT, apply that country’s VAT rates to their future sales, and file regular VAT returns. Before crossing thresholds, deliveries were treated as domestic sales and appeared with the domestic VAT rates in a local VAT return.
The new threshold is only 10,000€ and, therefore, much lower. It also applies EU-wide. That means that all cross-border sales, no matter in which EU countries customers are residing, count toward the limit. Once it is crossed, VAT registrations are necessary for all countries to which an Amazon seller ships products. To successfully register for VAT and complete regular local VAT returns the employment of local tax accountants is advisable as tax authorities only communicate in their national language and at times require a native to file returns.
This change aims at minimizing arbitrage opportunities but also increases the bureaucratic burden for Amazon sellers who are operating on several European marketplaces.
One-Stop-Shop for Amazon Sellers
The change of threshold limits came with the introduction of the One-Stop-Shop, a new regulation that enables some online sellers to take care of their EU-wide VAT duties in their home country.
When you are using the One-Stop-Shop you are implicitly dispensing the use of the 10,000€ threshold. Instead, you apply the country-specific local VAT rates to your sales from the start. Following that, you list all B2C cross-border transactions in an OSS report, which is filed in your home country, and pay the total VAT liability to your tax authorities at home.
The domestic tax office then redistributes the correct amounts to the countries, to which the VAT is owed. To enable that the OSS reports need to be created following very specific guidelines. Notably, you need to sort all transactions by country of package departure, country of package arrival, and applied VAT rate. Subsequently, the sums of all these combinations need to be entered into the OSS report.
While the sorting procedure is very time-intensive, the OSS still represents a simplification of the VAT compliance duties for pure Amazon sellers, whose shipments only depart from their home country. They no longer need local tax accountants and no longer need to keep an eye on varying country-specific deadlines.
VAT regulations for Amazon FBA Sellers
Sounds too good to be true? That’s because it is. Apart from the fact that creating a One-Stop-Shop report is a big task, there is another huge disadvantage for the usage of the OSS.
It only applies to cross-border sales and therefore doesn’t apply to deliveries within a country. This greatly decreases its usability, especially for Amazon FBA sellers who store products in Amazon warehouses in foreign EU countries.
Of course, Amazon FBA sellers don’t always know where their inventory is currently stored. That’s why an additional VAT registration is mandatory as soon as a product could potentially be stored in a country. That means, that Amazon sellers who take advantage of an FBA program like PAN-EU need to immediately register in all countries which are included in that program. They also need to regularly file returns.
If you use OSS, you then need to first distinguish between sales from a warehouse in a foreign EU country to customers in there, in a second foreign EU country, or customers in your home country. The first type of sale needs to be declared in the local VAT return and cannot be declared in the OSS report. The One-Stop-Shop only applies to the second type of delivery, as it crosses borders. The third, however, while still technically being a cross-border transaction, need to find their way into your local domestic VAT return, as seller and customer are residents in the same country.
EU-wide VAT compliance with hellotax
If you are an Amazon shop owner interested in the One-Stop-Shop or an Amazon FBA seller overwhelmed with VAT duties across Europe, hellotax offers a solution for you. hellotax is a VAT service and software provider specializing in Amazon businesses. While we are nowadays able to help many kinds of E-commerce clients, we started in the Amazon FBA industry and tailored our services to the needs of FBA sellers.
Our services include VAT registrations, VAT returns and filings, contact with local authorities, automated reporting, and a translation and editing service for local tax documents. We also offer a variety of OSS services that help you to create ready-to-file OSS reports and allow you to scale your business without spending hours sorting through transaction data. Services can be combined so that even Amazon FBA sellers storing products abroad can concentrate on their online business without worrying about VAT duties.
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