Sellers informed of changes to fulfilment options in preparation for the end of the transition period
With so much going on in the world right now, it’s understandable that Brexit and it’s impacts might not have been at the top of your mind. But with Amazon’s notice to merchants last month, many were reminded that they need to start preparing for the new legislation.
Cross-border trade between the UK and the EU will change dramatically at the end of the year. As the UK nears the end of the transition period, having formally left the EU earlier this year, Amazon is beginning to communicate what actions it will be taking to adapt their FBA programmes.
We’ve broken down some of the key points from Amazon’s announcement on the 14th of July and had a look into what they might mean for you and your business. We’ve also added in a couple of points around operating as a cross-border seller post-Brexit and what you’ll need to do.
The European Fulfilment Network (EFN) will no longer operate between the UK and the EU
If you have been using the EFN to reach customers around the EU, you will no longer be able to do so from the UK into to the EU or vice versa.
If you were sending goods into the EU from a UK fulfilment centre, this will no longer be covered by the EFN and you will instead be required to hold goods in, and therefore VAT register, in an EU country. The shipment of these goods from your local fulfilment centre were previously covered by the distance selling thresholds, allowing you to charge the local VAT rate until exceeding the thresholds in a calendar year.
Similarly, if you wish to continue selling to UK customers but have previously fulfilled from an EU fulfilment centre, you would now need to hold goods in an Amazon fulfilment centre in the UK and therefore, VAT register.
The Pan-EU Programme will no longer include the UK
The Pan-EU programme is popular with sellers looking to capitalise on accessing all Amazon EU marketplaces with fast shipping times. The removal of the UK from the listed countries will create a range of new considerations for you and your business.
Firstly, you will no longer be able to use the UK fulfilment centres to distribute your products into the EU. Amazon has informed merchants that they will be required to use any of the other 6 EU countries included in the network for EU distribution.
This might have ramifications on your typical supply chain. Similar to the effects on the EFN, this means sellers will need to import into the UK for access to UK customers or directly into the EU for access to the Amazon EU marketplaces. It’s important to take into account the potential increase to logistics costs and the added responsibility of managing inventory levels in different jurisdictions. Additionally, duties and import VAT will be charged twice, with import VAT being reclaimable upon filing the VAT return.
As a UK business, you may require a fiscal representative when registering for VAT
Fiscal representatives are locally established entities that are jointly and severely liable for the VAT owed by non-EU based businesses. Having one is required by specific EU countries and is designed to help tax authorities ensure VAT compliance by businesses established outside of the EU.
Before Brexit, UK businesses were included under the EU umbrella and therefore didn’t need at fiscal representative. However, now that the UK has left the EU, UK based sellers will be required to engage the services of a fiscal representative in countries such as Poland and Italy. These services will come at an additional cost to traders and will need to be taken into account when assessing the financial viability of markets.
You will need a secondary EORI number to import into the EU
EORI (Economic Operator Registration Identification) numbers are used to identify businesses importing into the UK and EU. When used on import documentation, EORI numbers enable businesses to reclaim import VAT in countries where they are VAT registered.
A GB EORI number can be used for importing goods across the EU until the end of the year. However, from the end of the transition period (31st December 2020), GB EORI numbers will not be accepted for EU imports. Instead, you will need to obtain a second local EU EORI number for your imports into the EU.
Similarly, if you’ve been operating with an EU EORI number, but you’re looking to start importing directly into the UK, you’ll need to apply for a GB EORI number.
If you have any questions about international trade post-Brexit, applying for a second EORI number or understanding the role of fiscal representatives, please contact our team today. We’ve been working on a variety of resources, including our Brexit FAQs, to help online sellers get to grips with new legislation so keep an eye out for more updates!
Need to know more?
For businesses looking to discuss their specific situation or learn more on this topic, we offer a Consultancy service that will ensure you get the tailor-made VAT advice you need. Contact us today to learn more.
This information was accurate at the time of publishing: 12/08/2020