March 22, 2017 by Andrew Minalto - 23 Comments

VAT For Amazon Sellers WARNING – Pan-European Fulfilment TRAP!

I’ve written about VAT a number of times on this blog, and with good reason – it’s a topic that causes a lot of confusion for online sellers and if you get it wrong it can really destroy your business. In my opinion, registering for VAT when you don’t need to is the biggest tax mistake an eBay or Amazon seller can make!

But all that has been covered before on my blog, numerous times in fact, so what’s the point of today’s article?

Well today’s post is really a warning about Amazon’s Pan-European fulfilment service – which is a HUGE tax trap under new EU law.

As you all know, when you sell on Amazon you get access to all 5 European marketplaces:

  • Amazon UK
  • Amazon Germany
  • Amazon France
  • Amazon Italy
  • Amazon Spain

And you can sell to all of these marketplaces with your one seller subscription, which is great! In fact you don’t even need to create multiple listings – you simply create your listings on your home marketplace (Amazon.co.uk for example) and if they’re eligible, they’ll “automatically be re-created in the remaining four marketplaces via Amazon’s ‘build international listings tool’.”

But Amazon have gone one step further and recently a very exciting addition to the Fulfiled by Amazon fulfilment service was introduced, called Pan-European FBA.

The idea behind it is very simple – it allows you to offer your products to all 5 European marketplaces but rather than your stock being stored and shipped from one fulfilment center (as is normally the case) – Amazon will distribute them across ALL 5 countries.

This of course provides a number of important advantages to us as sellers:

It’s FREE!

Amazon don’t charge you to distribute your stock and you don’t even have to do it yourself. You simple send your FBA items to your local Amazon fulfilment center and Amazon then spreads it around all 5 countries (plus two more) based on expected demand.

Your products become Prime-eligible!

Having your stock stored in the home country makes it eligible for Amazon’s sales boosting Prime delivery service in all 5 European marketplaces, meaning you’ll see a big boost in international sales.

Quicker delivery!

It obviously goes without saying that shipping domestically is going to be faster than having all orders sent out internationally from one Amazon fulfilment center. Faster deliveries means happier customers and more repeat orders.

Less FEES!

Yep, you read that right! Even with all the added benefits, Amazon’s Pan-European fulfilment actually saves you money! How? Well because you only pay the local fulfilment fee for that particular marketplace when one of your items is sold and you save the usual cross border fee charged when you sell via Amazon’s European Fulfilment Network (EFN).

Let’s take a quick look so you can see what difference this makes:

So as you can see, you save between 13-38% in Amazon fulfilment fees, depending on which country you sell to, which is a significant amount and nothing to be sniffed at.

I’m guessing you’re now wondering what the problem with Pan-European FBA is? After all, it’s free, it will increase your sales, and it actually saves you money in fees…!

But there is a huge downside to it that, judging by the emails and questions I receive, a lot of people are seemingly unaware of:

It means you have to become VAT registered in every country that your stock is stored in!

This is due to the EU law introduced last year to try and tackle overseas sellers who store stock in Europe, allowing them to undercut local sellers WITHOUT having to pay the same taxes.

Following this new rule, you now have to register for VAT as soon as you have inventory stored in a country. So if you have stock stored in Amazon’s fulfilment center in Germany, you need to register for VAT in Germany. If you have stock stored in Amazon’s fulfilment center in Italy, you need to register for VAT in Italy, etc. etc.

What this basically means is that you’ll have to register for VAT in every single country that Amazon stores your stock in, which also includes Poland and the Czech Republic (as well as the 4 European marketplaces).

And no – it doesn’t matter how much you’re selling. This is different to local VAT registration, where you only have to register once you reach the sales threshold (this is currently £83,000 in the UK but it’s generally increased every year).

As soon as you have stock stored in a European country, you need to register for VAT in that country (even if your sales are £0).

In comparison, when you store and ship products from a sole Amazon fulfilment center, we’ll use the UK for this example, then you only need to register for VAT in the European countries that you sell to once you reach their distance selling thresholds. Now these differ from country to country but generally it’s €35,000 (roughly £30,000) with the exception of a few countries (Germany, Netherlands, Luxembourg) where it’s €100,000 (roughly £85,000).

Just so there’s no confusion – using Amazon’s Pan-European fulfilment service means registering for VAT in 6 different countries. You’ll have to charge the correct VAT rates to the correct customers, keep records and file VAT tax returns for all of them as well.

People find it too much cost and work to do this for one country, never mind 6! I shudder just thinking of all that paperwork – and the cost is going to be huge as well as you’ll most likely need to hire a local accountant to take care of all the country specific details.

Realising how this is going to put off the majority of sellers, Amazon have teamed up with KPMG (one of the “big four” auditors with a revenue of $25 billion a year) to offer a special, discounted rate VAT service for Amazon marketplace sellers.

KPMG are offering Amazon sellers VAT registrations and filings in up to 7 EU countries at special bundle and discounted rates.

The cost is £700 per country per year OR £3600 per year for all 6 countries (which works out at £600 per country per year):

Now this may seem like a lot of money, and well… IT IS! But that’s because you’re registering and filing VAT returns in 6 different countries – so it’s actually not an unreasonable fee to charge. And to me it’s a perfect measuring point – unless you’re happy to pay £3600 for the privilege, then you should simply continue selling to Europe from Amazon’s UK fulfilment center.

After all, how much do you need to be selling to make that worthwhile? We discussed earlier how you save 13-38% in Amazon fees by using this service, so let’s call that 25%. That means to save the £3600 yearly fee you need to be paying £15,000 in Amazon seller fees per year (and that’s just talking about your fees for sales to European countries).

I know that’s a very simplified way of looking at this and it ignores the other benefits, but I just wanted to illustrate how this should only be considered if you’ve got the sales numbers to back it up.

All in all, I can’t see how this is beneficial at all and I hope you see why I called this a VAT trap – really nightmare is a more accurate term.

If you’ve fallen for the Amazon sales talk and signed up for this Pan-European fulfilment, then I’d love to hear from you in the comments section below. Has it made a huge difference to your sales and how are you handling all the tax requirements?

Until next time!

All the best,
Andrew

23 Comments
Click Here to Leave a Comment

  1. Hello Andrew
    Thanks for the great article, as usual an useful insight of online selling.
    With reference to Amazon and how VAT is being charged, I’m now very confused.
    I’m watching Jungle Scout sessions on how to set up an Amazon business in Europe. In their 6th session they covered VAT etc.. But they stated that it is compulsory to register for VAT in UK if you are storing your goods in an Amazon warehouse in UK, regardless of the turnover/threshold.
    In your previous posts you advised to wait to register for VAT until a seller reaches the threshold… Has this changed recently?
    Thank you for your assistance

    1. Andrew Minalto

      Hi Ale,

      Thanks for your question.

      In my post/advice on NOT to register for VAT – I was targeting people who live in the UK – they DO NOT have to register for VAT for Amazon business either, for stock they hold in Amazon UK warehouse.

      For anyone outside UK, if they want to use Amazon FBA UK – they have to register for VAT from day one.

      Hope this explains it and let me know if you have any further questions.

      Thanks,
      Andrew

  2. Hi Andrew,

    I have a business on Amazon and use FBA warehouses in UK. I am registered as a self employed here in UK but i haven’t registered for VAT yet. Still below the VAT threshold in UK. Do i need to register for VAT if i store my inventory in the UK as long as i live and have a company in UK?
    Thank you very much for your time,

    Best regards,
    Vali

    1. Andrew Minalto

      Hi Vali,

      No, if you’re based in the Uk and store your goods in the UK, you don’t have to register for VAT IF you’re below threshold.

      Thanks,
      Andrew

  3. Jeffrey Lewis

    Hi Andrew

    Great Article.

    I am selling on the Amzon UK and the other 4 EU Amazon marketplaces.

    The IT and ES thresholds are 35,000 Euros Net of VAT but I am well below that.
    The DE threshold is 100,000 Euros Net of VAT and I am well below that too.

    However my French sales will be around 40,000 Euros by the end of this year, 2017. So I need to Register with the French Tax authorities.

    A pain no doubt, but would Amazon then move some of my UK stored stock to France so that French buyers could enjoy Amazon Prime or would Amazon only allow stock to be stored outside the UK if you register for VAT in all European Amazon Marketplaces?

    Thanks
    Best regards
    Jeff

    1. Andrew Minalto

      Hi Jeff,

      I don’t know to be honest – I haven’t expanded to PAN-Europe program myself as right now concentrating on the UK and USA markets.

      They probably could do that, it would make sense but I have no personal experience with this.

      Andrew

    2. It is possible and easy.
      Settings,
      Fullfilment by amazon,
      Cross-Border Fulfilment Settings,
      Allow inventory to be stored in other countries:
      France, United Kingdom
      save
      now your inventory will be stored in those 2 countries.
      You can also send inventory to France now.
      ps. You do NOT need to enable Pan-European FBA

      1. Andrew Minalto

        Yes, but you do need to register for VAT in each country your inventory is being stored.

  4. Hi Andrew,

    Any tips for a newbie looking to start selling on Amazon and finding a product to sell on Amazon?

    Many thanks

    Charlotte

    1. Andrew Minalto

      Hi Charlotte,

      I will be doing a post about Amazon product research next month, so stay tuned for that.

      Andrew

  5. Hi Andrew

    First off thank you for your amazing blog. I recently found out about it and it has been extremely informative and helpful in my new journey.

    I am new to Amazon FBA, around a month, UK based, intending to sell into the US market. I’m close to getting my first product shipped from China to the US. It’s a small test order of around 100 units. I’m dipping my toe in slow so to speak. Last night I registered as a professional seller but instead of being billed the $39.99 subscription fee, I was billed $47.99.

    I’ve combed through your website and failed to find anything on the topic. Google surprisingly only yielded a bit of information. But apparently the extra $8 is 20% EU VAT tax. According to an Amazon forum post, if you live in the EU, Amazon.com will charge you VAT on their services INCLUDING fba fees. This has come as somewhat of a shock to me, as it would wipe out a large chunk of my margin. I thought i was thorough in my research, but turns out i wasn’t. Before being allowed to become a professional seller, i had to fill out a “Tax Interview”. It was very short. I stated I am an individual not a business, a UK citizen living in London.

    Do you have any advise or information on the topic?

    Is this the correct process or am I missing something? Why do I have to pay VAT on physical goods that never enter the EU?

    Thank you very much in advance

    Kind regards

    Osman

    1. Andrew Minalto

      Hi Osman,

      Thanks for your comment.

      I personally don’t sell on Amazon USA so don’t know all the small details but yes, they do charge VAT on your pro seller subscription fee. This is required by law and is done for any digital product/service.

      Not sure about the FBA fees though – you should contact Amazon’s customer service and find out whatever FBA fees will be VAT applicable or not.

      If they’re, I would recommend that you register for VAT, to claim back VAT you pay on these expenses. As your goods will be exported outside of the EU, you won’t have to charge VAT on your selling prices and will be able to get back ALL of the VAT you pay to Amazon via HMRC (when you do your VAT returns).

      Thanks,
      Andrew

      1. Hi,

        I believe Amazon head quarter is in Europe which is why the VAT is added to FBA fees even if you sell in US. Amazon does not issue VAT for these fees but you will see their own VAT number on seller central document or FBA fee statement. For this reason as far as I am aware you can’t claim back the VAT. However if you register for VAT and provide this number to Amazon, future VAT added to FBA fees or subscription will not be added.

  6. Hi Andrew,

    Very nice article! Thanks.

    So how do you sell in other European countries by keeping your stock in a UK fulfillment center?
    I thought that as soon as one wants to sell out of the UK, Amazon would automatically move part of the inventory out of the UK too in order to be local to their customers.

    Is there a way to sell in other European marketplaces by keeping the inventory in the UK (and so no need to be VAT registered!) ?

    Thanks!

    1. Andrew Minalto

      Hi Paul,

      No, you don’t have to use Pan-European fulfilment if you don’t want to! You can still sell on European Amazon sites AND fulfil orders from UK warehouse.

      Please read this page for more information on how these programs work:

      https://services.amazon.co.uk/services/sell-online/international-selling.html

      Thanks,
      Andrew

      1. Thanks Andrew!

        1. Andrew Minalto

          No probs! 🙂

          1. Hello Andrew,
            do you offer service where i can discuss how to register to Amazon Europe and register for VAT? thank you

          2. Andrew Minalto

            Hi Ron,

            yes, `I can help you with these questions via my CWA service:

            http://www.chatwithandrew.com/general-advice/

            Thanks,
            Andrew

  7. Hi Andrew, yes I signed up to pan Europe programme and did have a boost in sales but then realised about all the other tax implications and de registered. Unless you are selling huge amounts, it’s not worth the extra head ache. I just up my prices to cover the extra fees when sending from my UK FBA inventory.

    Thanks Mike

    1. Andrew Minalto

      Yes, it can only really work if you have massive sales, otherwise it’s pointless.

      Thanks,
      Andrew

      1. Really interested in this article as Amazon are trying to get me signed up at the moment. What would you class as massive sales? I’m really not sure whether to go ahead or not. Also, if you register for VAT in all these countries does it open up any other potential things you will be liable for in those countries?
        Thanks
        Sarah

        1. Andrew Minalto

          Hi Sarah,

          It depends on the items you sell – check how well they sell on regional Amazon sites using JS tool:

          https://andrewminalto.com/jungle

          Then you can make a more informed decision whatever it’s worth selling on regional sites too.

          Also, don’t forget that you can sell on regional sites and fulfil orders from Amazon UK too, without registering for VAT etc. in those other countries.

          Lastly, if you do go ahead and register for Pan European program, I would highly recommend to use Amazon’s VAT service, where they will help with VAT numbers and VAT returns. As doing those VAT returns in every country won’t be something you can really do on your own, unless you’re an accountant by trade.

          Thanks,
          Andrew

Leave a Reply