Selling on Amazon (FBA) B2C: VAT issues

Amazon (Fulfilment By Amazon) does not take responsibility for trader’s tax issues.  VAT, customs and income tax on profits are the sole responsibility of the e-tailer or seller.  Traders on FBA therefore need to understand how VAT on cross-border transactions works.  The VAT threshold of £83,000 does not apply to foreign sellers.  It only applies to UK-based businesses.  As a foreign seller you must register for VAT for even £1 worth of sales.

The place of supply of goods (the VATability) in a cross-border B2C supply situation, is in the country where the journey in the goods begins.  FBA dispatches customer orders from its local warehouse in the country of the customer or end-user.  E.g.  dispatches to German customers will take place from FBA’s warehouse in Germany, rather than say from the UK warehouse where the trader may be holding most of his stock.  This will require the trader to have a VAT registration in Germany as this is a “domestic” sale rather than a “distance” sale.

There are also VAT issues regarding the transfer of the stock from one EU country to another, in this case bulk stock is transported from the trader’s warehouse in the UK to FBA’s warehouse in Germany.  The VAT treatment will depend upon whether this is a transfer of “consignment” stock or “call-off” stock.  In certain situations the dispatch will give rise to a “sale” and in others its not a sale but just a “transfer”.

The situation may be further complicated if the UK-based trader is an “agent” acting on behalf of say a non-EU principal e.g. a USA or a China vendor.  There are special VAT rules in a agency-principal situation.

Furthermore, the UK is a “common law” country similar to USA but most of the other EU member states are “civil law” countries.  The concept of “commissionaire agent” may be different there than in the UK leading to contractual complications with tax implications.

Due to the complexity and interaction of tax and other legal considerations traders should take advice and plan well ahead.  VAT rates across Europe average 20% and losing this amount off the bottom line is not an option for survival!



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