Unlike in the United States, where tax is added on after the purchase price, in EU countries, tax is included in the final price. What does this mean for AliExpress and Amazon B2C e-sellers? If you sell goods online in the EU, you are responsible for paying VAT (Value Added Tax) on fees from Amazon and Alibaba, whether you make sales or not. Whether you need a VAT registration number will depend on where you reside and which countries you sell your products in. Some sellers will need to register for VAT immediately, before they start selling products in the EU. It can all be a bit daunting, so in this blog post we clear up some of the confusion.
The main complexity surrounding EU tax law is that while each member state is governed by overall VAT regulations, every country has its own national tax percentage and requirements. As a distance seller operating across multiple territories, it can be challenging to stay on top of all the requirements for each country you sell to. You are required to file monthly or quarterly VAT returns with the appropriate tax office and pay the tax you’ve collected on your sales.
Deciding how to store your products
As you can see, it can be a challenge to sell products to the EU, as every country has its own tax rate. Amazon has created a solution to help more companies trade in the European market, simply by offering various storage and product fulfilment options. The easiest method for new sellers is to go with one country, such as the UK, and opt for “EFN FBA” storage. This means you only need one VAT registered number, but this option does come with higher fees and longer delivery times. Amazon’s “Pan EU FBA” option is for more ambitious companies that want to offer their products in more European countries. Amazon will store your products in the countries it deems most strategic, based on where you’re selling to. You’ll pay lower fees, but keep in mind that you’ll need a VAT registration number in each of those countries. Your stock in these countries will also be offered with “Amazon Prime” for delivery within 24 hours, making it an excellent option for businesses looking to provide the best service to their customers.
How much VAT should you add?
As an e-seller, you’ll want to include VAT in your selling price so you don’t lose money on each sale to the consumer. To calculate the tax involved in selling your products online, you’ll have to work backwards, going through each part of the supply chain. Use a handy VAT calculator to help you figure out the tax you’ll owe or, if numbers make your head hurt, consult a EU VAT compliance company, such as ATG Tax Global, to get the number crunching done for you. We will make sure your tax returns are filed correctly and on time for each country you sell products in.
We’ve had clients who have had to close their online stores because they don’t have a VAT number in the country they trade in. It can be confusing to determine the right thing to do regarding VAT registration, as the rules differ depending on where you reside, where your products are stored and where they are sold.
Don’t try to figure out VAT rules and regulations on your own!
Don’t try to figure out VAT rules and regulations on your own! Request a free, 30-minute initial consultationRequest a free, 30-minute initial consultation to find out more about our services and how we can help. Our expert tax consultants will discuss your requirements with you and advise you on the best course of action to ensure your tax compliance abroad.