Let’s talk about Value Added Tax (VAT) as it relates to selling on Amazon.
Recently, there has been a storm forming around this subject, especially after the infamous Amazon invalid VAT number email that I covered in last week’s post. I have received tons of emails from my blog readers asking one simple question: DO I HAVE TO REGISTER FOR VAT?
Since I am often responding to each individual with the same answers and information over and over again, I’ve decided to create a blog post that answers this question in as much detail as possible. I will cover as many scenarios as I can think of, so that after reading this post, it is 100% clear whether you, in your specific case, have to register for VAT to sell on Amazon or not. With that, let’s get started!
The Basics of VAT
VAT is something we all hear about and experience on a daily basis, whether it’s through business transactions, Amazon forums, retail shops, or invoices and receipts. VAT (Value Added Tax), as the name suggests, is a consumption tax based on the value of goods and services. This tax is used in all European Union countries, as well as many other countries. In Canada, for example, it is called GST (Goods and Services Tax), but the principle remains the same.
The VAT rate varies from country to country, but in Europe, it is usually around 20%. Here are a few examples of current EU VAT rates for 2018:
- Belgium – 21%
- Austria – 20%
- Denmark – 25%
- France – 20%
- Germany – 19%
- Ireland – 23%
- Italy – 22%
- Poland – 23%
- Sweden – 25%
In the UK, the rate is set at 20%, which actually puts us amongst the countries with lowest VAT rate. In the past, it has been even lower; prior to 4th of January of 2011, the VAT rate in the UK was just 17.5%, and there was once a temporary period where VAT was only 15%.
The VAT rate we are talking about here is the STANDARD VAT rate, which is the rate used on most everyday goods like:
- Home products
- Garden products
- DIY & tools
- Clothing & shoes
Basically, most everyday products that you see on Amazon or in your local Tesco will have the standard VAT rate of 20% applied to them. It is the rate you are most likely to encounter on a daily basis. (more…)