VAT For Ecommerce

When you are selling online, fulfilment of orders accurately and on time becomes your biggest challenge. In this situation, Amazon can turn out to be your knight in shining armour, since amazon boasts of the most efficient fulfilment networks in the world, which your business can truly benefit from. Fulfilment by Amazon (FBA), lets you store your products in Amazon’s fulfilment centres/warehouses. When an order comes in, Amazon picks, packs and ships the order on your behalf. They not only provide exceptional customer service on your behalf, but FBA will also enable you to break into new market places and gain more customers. Checkout what else FBA can do for your business here.

Let amavat® keep care about your VAT obligations

“As amazingly convenient as FBA might be, it takes no responsibility for your tax issues. As far as Amazon is concerned, VAT, customs and income tax on profits are the e-tailers or sellers responsibility and they need to take care of them at their end. This is why it is important for businesses using FBA to understand how VAT on cross-border transactions works.

The VATability of any goods involved in a cross-border B2C supply situation originates from the country to which the product belongs. FBA ships orders from its local warehouse in the country of either the customer or the end-user. e.g. FBA will ship orders of German customers from its warehouse in Germany, instead of shipping them from its UK warehouse where the retailer has the bulk of its inventory. This entire process demands the retailer has VAT registration in Germany since this is a ‘domestic’ sale instead of a ‘distance’ sale.

You will also encounter VAT issues when transferring stock from one EU country to another. This needs the bulk stock to move from your warehouse to FBA’s warehouse in Germany. In such a situation, the VAT protocol depends on which category the stock falls in; consignment stock or call-off stock. The difference between these categories is that one is for “sale” purpose, while the other is simply a ‘transfer’.

This situation can become complex if the UK-based retailer is actually an “agent” representing a non-EU principal e.g. an American or a Chinese company. Special VAT policies are applicable in an agency-principal situation.

Here it is important to remember, that similar to the USA, the UK too is a ‘common law’ country, while EU member countries are ‘civil law’ countries. The protocols applicable to a ‘commissionaire agent’ are bound to be different in the EU region leading to contractual differences in tax implications.

This is why retailers and traders engaged in cross-border selling need to be well prepared for such taxation and legal complexities. Touchstone ensures that your association with the FBA Program stays VAT compliant in Europe and any other country you wish to take your business to!”