Why do you need VAT number in other countries and how does VAT work in Europe? In this article, we’ll explain what you need to know to get started.
VAT ID numbers
Why register in other countries?
Imagine having your product stored in an Amazon fulfilment center in Germany. From the factory, you have your cargo shipped directly to a fulfilment center. So in Germany, you import your goods and pay VAT import. Reclaiming import VAT can be done through the German tax authorities. When a customer then buys your product through Amazon.de, it will be sold and shipped to your customer from Germany. So you sell from Germany instead of the United Kingdom. That is why you are also subject to VAT in Germany. Since the end of 2019, Amazon is now obliged to have a German VAT number to sell on the German market. This also applies to a French VAT number and other European countries. Make sure you have a VAT number before shipping inventory to Amazon. We have experienced that people had their stock already on Amazon and were told that they had a month to arrange a VAT number or Amazon would destroy the inventory. So get this done in time!
The benefit of registering in other countries can be that you are dealing with a lower VAT rate. This is beneficial for your profit margin! Please find below an overview of the different VAT rates in Amazon’s main sales countries at the moment.
Overview of VAT rates by country Amazon is active:
|Country||Standard VAT rate||Low VAT rate|
|France||20%||10%, 5.5%, 2.1%|
|Italy||22%||10%, 5%, 4%|
|Czech Republic||21%||15%, 10%|
When do you need more VAT numbers?
- UK: £ 70,000,-
- GE: €100,000,-
- FR: € 35,000,-
- IT: € 35,000,-
- ES: € 35,000,-
- BE: € 35,000,-
- PL: € 35.000,- (160.000 PLN)
- CZ: € 43.000,- (1.140.000 CZK)
The orange countries on the map are the countries where your products are stored in a fulfilment center. So you sell from the country to customers in the same country. That is why you need to pay VAT in every country you sell from (and inventory is located). The seller in this figure should therefore be registered for VAT numbers in the UK, Germany, France, Spain and Italy.
As you can see, he also sells to Poland from Germany. Since Germany’s sales in his case have not yet exceeded the threshold applicable to Poland, he does not need a VAT number in Poland and therefore pays VAT to the German tax authorities if he sells a product to a Polish customer.
Because it’s cheaper to sell within the country where your cargo is located, it is advisable not to wait too long to apply for VAT numbers in other countries. Germany and France are great markets to get started and test your product. If your sales run well in one of these countries, we recommend making sure the next one can sell from the other. Then you spread your cargo across Germany and France and Amazon automatically sends product from one warehouse to another to serve the country with the most demand.
Example VAT return and VAT reverse charges within the EU
We take an example to report in the Netherlands. In this example, you sell from the Netherlands to customers in other European countries. The Tax Administration portal allows you to specify how much costs you have incurred and how much you sold. Then enter how much VAT should be paid/received.
Please note that if Amazon uses 0% VAT, it means that the VAT will be shifted to you. In this case, you need to calculate how much VAT you should specify and specify this amount. You then request the amount back within the same return. As an entrepreneur, you are entitled to claim back VAT paid. As a result, you do not pay net tax but make sure you have indicated the amounts. If you do not do this, the tax authorities will find out pretty quickly because Amazon does say in their return that they delivered you at 0%. So pay attention to that!
Pan-european & BTW
Are you planning to sell Pan-European through Amazon? Please note that in these 6 European countries you need a VAT number: Germany, France, Spain, Italy, Poland and the Czech Republic. Many people think when they hear this, “doesn’t Pan-European FBA only focus on the first 4 countries?” True. You have listings in the 4 countries, but Amazon can move your inventory to Poland or the Czech Republic and serve the customer from there. Because of the lower labor costs in these countries, Amazon is also more interesting to provide products to your German customers through Poland. That means that you also need to register and report in Poland and the Czech Republic!
Update January 1, 2021: Currently, the UK is excluded from the PAN-European program. Should an update be followed, we will let you know.
Register for VAT
Now that you know which countries you are going to sell from or which countries you are going to cross the long distance sales threshold in, you can start registering VAT numbers.
Registration consists of three parts:
- Fill and send forms from the relevant tax authorities.
- Assessment and processing by the tax authorities. This takes an average of 1 or 2 months, but can take up to 6 months in Spain, for example.
- Setting up online account for returns.
If you have been assigned a VAT number, remember to add it to Seller Central.
Then make sure that invoices are automatically placed on the country where you actually do your sales and incur your costs!
Periodic VAT returns
If your VAT number is in, you are required to provide periodic VAT returns. Usually, like in the United Kingdom and the Netherlands, this is quarterly. However, there are exceptions:
- In Germany, you are required to report 13 times in the first year (12 months and 1 throughout the year). After that, you are filing quarterly.
- In France, you make a standard monthly return.
- At different tax authorities, you can specify the period in which you want to file a return when registering. Take care of what you set up. The most convinient will be to set a period in line with the VAT returns you already have.
Be prepared for inspection and be ‘in control’
There are two things to consider in terms of inspection:
- In some countries, such as Germany, the tax authorities sometimes ask for an overview of your earnings and expenses on Amazon. If you send an Amazon-generated Seller Central report this is usually enough. Note that the numbers you enter with the tax authorities must match your figures in Amazon’s reports. As logical as this may sound, it does not always go well. So be aware of this when calculating your total costs and revenues for a period of time.
- Should you get inspection from a tax authority, it’s important that all your financial information is stored in a structured manner. Of course, you can use Excel and store all your invoices neatly in folders. What works more convenient (and often easier and faster) is an accounting program such as Exact, Xero or Quickbooks. You can link these packages to Amazon, which automatically puts your sales data into your accounting records. When choosing a package, be sure to what extent this is possible.