Non UK FBA orders and VAT
I’ve just noticed an FBA order where the amount I’ve recieved is not as much as usual. Upon checking I see the customer is in Malta. I know that Amazon collect the VAT and pay it directly to the tax authorites in Malta but this raises a few questions.
Firstly, I notice that the total order including VAT is not as much as it should be. The price of the item is £14.99 but on the order the total is only £14.74. Why is it 26p short? Am I missing something here?
Secondly, since I’m not VAT registered and it wouldn’t be worth it for the amount of non UK sales, how are you accounting for the extra cost?
For example, a sale on this product in the UK results in a net payment to me of £10.49, but the order to Malta resulted in only £8.09, a difference of £2.40
I’m still making a profit but for some people on some products you could end up making a loss. It would be nice to be able to charge more to non UK customers or maybe block some product lines but since this is FBA I guess that’s never going to happen.
How are you dealing with this?
Non UK FBA orders and VAT
I’ve just noticed an FBA order where the amount I’ve recieved is not as much as usual. Upon checking I see the customer is in Malta. I know that Amazon collect the VAT and pay it directly to the tax authorites in Malta but this raises a few questions.
Firstly, I notice that the total order including VAT is not as much as it should be. The price of the item is £14.99 but on the order the total is only £14.74. Why is it 26p short? Am I missing something here?
Secondly, since I’m not VAT registered and it wouldn’t be worth it for the amount of non UK sales, how are you accounting for the extra cost?
For example, a sale on this product in the UK results in a net payment to me of £10.49, but the order to Malta resulted in only £8.09, a difference of £2.40
I’m still making a profit but for some people on some products you could end up making a loss. It would be nice to be able to charge more to non UK customers or maybe block some product lines but since this is FBA I guess that’s never going to happen.
How are you dealing with this?
52 replies
Seller_tRuvBEHDedp4q
I can answer this part. Maltese VAT rate is 18%. Amazon remove the UK VAT element then add on the Malta VAT element giving a price to the customer of £14.74 which is correct.
The UK VAT element is £2.40 - as Amazon removed the VAT part from your disbursement this also accounts for why you are £2.40 short on the Malta sale.
If you were VAT registered then on a UK sale you would owe £2.40 to HMRC. So your net payment would be exactly the same as the Malta sale.
Now whether Amazon should be removing the UK VAT when you are NOT VAT registered is another matter. Are you registered as being non VAT registered with Amazon and is the Tax Code on the product set to NOTAX?
Seller_GJB0Xc3R2ydPq
Hi,
How do you turn off FBA export please ?
Kindest regards Mike
Seller_GJB0Xc3R2ydPq
Thanks you for your help again Demel…
Seller_NFsfN9lkamUnh
Exactly this has happened to me this week.
I am not VAT registered. ( I have done the VAT registration exemption in settings. )
I have sold a £37 item to a customer in Rep of Ireland.
Amazon reduced my selling price to £30.83, then added Irish VAT to the customer’s price. Customer paid £37.92
And yes, I am now making a small loss on this sale.
Seller_4AW7HpHiEAskF
In response to how to book the expense in your accounts see the bottom of this post. The law we have to follow is very clear, but FBA is a total anomaly for non-VAT registered sellers. Apologies for the long answer but I figure it might help some people to be clear on the background law outside the Jungle and the differences inside the platform.
So, if you buy in the UK you pay VAT in the UK. Consequently if you buy on Amazon UK or any other UK based website, app, platform or retail outlet you pay UK vat at the point of sale, you pay it in the price, but you only pay it, if it is charged.
For export, when the goods leave the UK the buyer can reclaim the vat they have actually paid in the UK if they have a valid VAT invoice from a VAT registered seller inside the UK. Anyone can do this at any port or airport.
That is it for the export of goods purchased in the UK.
When the goods arrive in a third country the buyer/importer (not the UK vendor) must declare the full net price so if net and gross are the same (as in non-vat invoices), they pay the charges on full retail.
Meaning if you are a vat exempt UK seller, vat should never be deducted in any circumstance. It really is that simple.
But as you have seen this is not what happens on Amazon UK for FBA sales to the EU. They probably get some exemption from HMRC that we don’t know about or are not in fact selling in the UK at all. Maybe their POS is actually Luxembourg or such like.
The effect is, companies that are exempt from VAT under UK regs selling on an ostensibly UK platform end up being charged VAT THEY CANNOT LEGALLY RECLAIM, and as you say this renders thin margin (15% net or less) goods unsaleable in all EU markets.
That said it is a complete waste of time and effort to even think about this, because it is literally in nobody’s interest to change.
The customer can buy goods cheaper than they should really pay.
Amazon can sell more widely and on the face of it, Amazon do not seem to have to fork over the VAT they collect from non-vat registered companies. I’ll bet they do fork it over, but the fact is if you or I did this we could just keep the deducted monies because no vat was ever charged.
The EU are happy because they get all that vat in cash from Amazon, which is far easier and cheaper than getting it from you, me or the buyer individually,
Vat registered sellers are happy because non-registered European sellers are unprofitable outside their home markets so the advantage of non registration is lost. (we’ll ignore the oversized oriental elephant in this room)
And the UK government has no net interest so doesn’t give a monkeys.
Given all the above regarding accounting DO NOT RECORD THIS AS VAT OR TRY TO RECLAIM IT. YOU HAVE NOT CHARGED VAT. Record it as extra Cost of Sale charges, or if you prefer post to an overhead like advertising.
The way I see it I hope to expand into EU markets next year so a few sales as loss leaders can’t really hurt and in fact it may show me where I might go first.
As I said it is literally in nobody’s interest to do anything about it. All you can do is be careful not to record it as a vat output before you are vat registered and move on.
Seller_tRuvBEHDedp4q
One further thing that has just occurred to me…
A VAT registered trader has to to also record the sale as £12.49 with no VAT due - so they also have to ignore any VAT element in any invoice/document etc Amazon may supply - and not put it in any VAT or other nominal category.
The sale was to Amazon (ex VAT as per regulations) so Amazon only pay/disburse £12.49
The sale is NOT recorded as a £14.99 sale with £2.50 VAT (or even the £2.43 Malta VAT). If it were then the seller would owe HMRC this VAT - but they never received this from Amazon in the first place.
So safest and most accurate way to account for the sale (whether VAT registered or not) is to record the amount actually received from Amazon. If VAT registered mark it as a Zero Rated sale, if not VAT registered then its n/a.
Seller_tRuvBEHDedp4q
As I have explained above - the problem lies in that Amazon have allocated and use their own tax codes on these type of orders, completely ignoring any setting the seller has made or even whether the seller is in fact vat registered.
Amazon made an announcement sometime ago that they would allocate a tax code per Category and use this code on these type of sales - ignoring any tax code set by the seller. This is OK as they need to apply the correct tax when they sell the item on. However, his has the effect as described that non VAT registered sellers are now seeing a removal of UK tax on sales into the EU.
Its not that you have agreed to any discount anywhere - its just the way Amazon have cobbled together the logic to facilitate these type of sales. They have assumed all sellers are VAT registered.
Eventually, the situation may change. It will need a lot of complaining by non VAT registered sellers to Amazon (and perhaps to HMRC) to get it resolved. When (or if) that happens then the logic should be:
- Is seller VAT registered? If not do not remove any tax and goto step 3
- Look up UK Tax Code for the Product Category and remove the UK tax element from price
- Using the delivery address, look up the Tax Code for the Product Category and add on the tax for that country.
When you Edit a product, under Offer tab, there is a Product Tax Code. Usually you set this to either ‘A_GEN_NOTAX’ or ‘A_GEN_STANDARD’ but there are other settings depending on your product. However, if you are not VAT registered, perhaps the setting does not show - I dont know.
But, as I explained above, until Amazon change the logic then this setting will have no effect on these type of sales. However, I would advise setting it correctly now (if it is available) for future use.
I was using figures from OP. Their item was listed at £14.99 on UK site. Amazon removed £2.50 VAT from the sale and then added £2.42 Malta tax.
You say you charge £12.49 on UK platform for your item - but VAT charged was £2.43. Amazon do not give you the £2.43. VAT is irrelevant for you on 2 counts - you are not VAT registered AND as the item is ultimately an export is also not applicable anyway. Your sale was actually to Amazon at £10.06. The fact Amazon later added on VAT is irrelevant.
Think of it like this - if someone bought it from you at £10, all HMRC are interested in is that final £10 figure. They are not interested in any discount you gave - only the final sale price. Now, you could account for it as a £12.49 sale with a £2.49 discount or as a £10 sale - it will make squat difference to HMRC. The item could have been temporarily on sale. However, if you categorise that £2.49 as anything other than a discount (e.g. advertising) then HMRC will now be expecting to see an invoice/receipt for that £2.49. If you are using any type of accountancy package you have to categorise all expenses. I suppose you could setup a new Category called ‘Sale/Discount’ and assign any discounts to that (or in the case of the Amazon sale the tax) and that would work, but really HMRC are only interested in the bottom line. Just like you do not need to have an accountancy line per sale - having a daily, monthly or even quarterly total is sufficient for HMRC.
