With the 2021 EU VAT changes fast approaching, we’re here to clear up the VAT responsibilities of sellers using Amazon’s Pan-EU FBA programme.
Barely has the dust settled on all of the Brexit changes and the EU is signing a Directive to shake up the VAT landscape once more. From 01 July 2021 the EU’s VAT Ecommerce Package will be coming into effect, bringing with it a number of wide-reaching changes to Amazon sellers.
A record-breaking year for ecommerce
The ecommerce sector has been booming, bolstered by the pandemic, more people than ever are choosing to buy online. This global trend looks set to continue, with shopping online looking to become the new norm. Last year saw the industry grow as much as it had in the previous ten years in only three months. This was evident from Amazon’s record year with yearly revenue up 38%, and sales up more than 51% in the UK alone.
Due to this increase in online sales, the EU has been looking at ways to streamline VAT accounting, and the EU VAT Ecommerce Package was born. The main aim of this initiative is to make VAT reporting easier for individual sellers and try to shift the VAT responsibilities onto marketplaces.
A package primed for Amazon sellers
Some of the key changes coming with the directive include the creation of two new simplified VAT schemes for B2C sellers, the One Stop Shop (OSS) and the Import One Stop Shop (IOSS). In addition to this, the directive also brings with it a shake-up of the distance selling rules and changes to VAT liabilities for online sellers.
One of the biggest changes coming your way will be to the way you collect VAT on your sales. Currently the VAT liability lies with you, the seller. This creates complications for sellers, so to overcome this, the EU has now shifted the burden of VAT onto the marketplaces in some cases. From 1 July, Amazon will charge the customer the appropriate VAT rate at the point of sale for transactions from stock held in an EU country and sold by a non-EU based business. This means that as a non-EU based business, you will instead have to record this as a zero-rated supply to Amazon and report this as such on your VAT return.
However, holding stock within an EU country will still trigger the need for a VAT registration. So, when selling pan-EU, you will still be required to register for VAT in each of the countries where fulfilment warehouses are located. If you need help registering your pan-EU store, get in touch with our team.
Making life easier with the new OSS & IOSS schemes
The EU VAT Ecommerce Package also introduces the brand-new OSS and IOSS registrations. If your business is based within the EU or has an EU presence, such as a branch or office within the EU, you will be eligible to report your distance sales of goods through OSS. This will allow you to submit a singular VAT return for all EU countries instead of the multiple returns you currently have to submit. This option is not available if your business is based outside of the EU and has no permanent establishment within the EU.
The Import One Stop Shop will not be necessary when selling pan-EU as your goods will be located inside the EU at the point of sale.
Simplified EU-wide Distance Selling Thresholds
An additional change for ecommerce sellers will be to the EU Distance Selling Thresholds (DSTs). The current EU DSTs set state-by-state, will instead be replaced with either no threshold, for non-EU based businesses, or, an EU-wide threshold of €10,000, for EU established businesses, relieving some of the barriers to market for smaller EU businesses.
The 2021 EU VAT changes should make your lives easier as Amazon pan-EU sellers, meaning you can spend more time focusing on growing your Amazon store and less time worrying about your VAT compliance. It’s important to remember that whilst these changes will simplify your reporting requirements, you will still need to register for VAT in each country you hold stock within. For help getting started on registering your pan-EU business for VAT, get in touch with one of our international VAT compliance experts today.