Tax Document Library - What to do with these VAT Documents?


#20

This where you’d probably need to consult someone that really does know about VAT. My understanding is that you either shouldn’t be charged the VAT on the seller fees (because you’re registered as a business outside the EU) or if you are charged them you should be able to reclaim them as input VAT (or as @PeterB says, you should be ‘charged’ VAT - see reverse charging VAT - but them immediately reclaim it).

The VAT in your example is charged in two parts; VAT on the value of the product at the border, which is to allow it to enter the EU market and VAT on the value added. The second part should be calculated as VAT charged to customers minus the input VAT. Again using a product of £120:

  • £20.00 output VAT
  • £2.00 input VAT already charged at border
  • £0.36 input VAT on Amazon Fee (possibly via reverse charging method)
  • £0.xx input VAT on FBA fee (possibly via reverse charging method)
  • £0.xx input VAT on Adverts (if this has been charged by the UK entity then it wouldn’t be via the reverse charge method)

Then separately you have your regular accounts:

  • £100 profit
  • minus £50 cost of product
  • minus £18 Amazon fee
  • minus £x.xx FBA fee
  • minus £x.xx adverts
  • minus other costs of business
  • then you pay tax on that

@PeterB - does that sound right?


#21

You should be able to deduct VAT on seller fees from your VAT liability as an input tax. At present there isn’t actually any cash movement, you have to declare the VAT that would have been charged, but I believe in such a way that you don’t actually have to pay it as you would effectively immediately reclaim it. It is an accounting exercise only.

As with the US - UK businesses pay corporation tax which sounds equivalent to your Schedule C. We deduct operating expenses from it but you don’t get to deduct taxes.


#22

Precisely. If Amazon is charging at a rate of 0%, but I am supposed to report it at 20% in the form of a Reverse Charge, only to then report the entire amount as Input, it seems like it would make more sense not to report it at all.

I think that is what I’ll do and consider this whole matter sorted. My hope was that the invoices Amazon was sending me would be helpful in some way, but in the end, it seems like they’re simply redundant. Perhaps the 0% amount is correct and no action is needed since I am registered as a non-EU seller.

Thank you all for your replies on this.


#23

You can’t claim the same profit and loss from foreign countries, it’s that simple.

It stings my heart when I have to pay EUR4,000 in German VAT when I know they have born no product costs but that’s they way it is. I claim all that VAT back from the UK.

My UK VAT obligation has reduced considerably since going PAN EU.


#24

Amazon will be reporting your VAT number in their EC sales list equivalent somewhere. If you don’t report the VAT in your return it is fairly likely that you will run foul of HMRC. They aren’t asking you to do it for fun. FYI, no reason you would know the but the one single government agency known to be utterly ruthless and draconian is the VAT man. They can shut your business operations down with a stroke of the pen, and will do so if they feel your record keeping has not been 100%. Having the VAT man on you seems analogous to when I see US people say they are being audited by the IRS.


#25

VAT is treated as customs end excise. VERY serious compared to other tax offenses. They should sort it out or bugger off. In my personal opinion.


#26

I am referring to the 0% being charged on Amazon fees and FBA that it has been stated here would normally be charged, but then claimed as input, which makes sense.

I have paid all the VAT on sales transactions. That is automatically calculated by Amazon and I know to submit a quarterly return and payment.

If HMRC ever tells me I should have paid 20% on Amazon Fees and then reported it as Input only to get the entire amount back, which seems pointless, I’ll have the filing agent submit backdated returns with the correct amounts that add up to zero.


#27

Get a tax advisor ffs.


#28

You would still have fines to pay for mis-reporting though even if no VAT was due.


#29

Do they teach Tax Law as a regular class throughout primary and secondary education in Europe? I mean where is a sole trader to learn that “failing to report what you don’t owe” results in penalties?


#30

VAT is a highly regulated tax. To be the director of a company that is registered for VAT is actually a slightly big deal and it is a position of responsibility. Filing VAT returns is a much more serious business than dealing with your own personal tax, or even company taxes as a sole trader.

The fact is that because of the way you are trading (storing stock in the UK as an overseas seller) you have been caught up in a tax/reporting requirement that is probably significantly beyond what you might otherwise expect to have been. It is just one of those things.


#31

I am a sole trader with no employees, not a corporation. I design and manufacture relatively inexpensive, albeit highly specialized products for an incredibly small audience. There is a demand for my products in the UK market—even a local UK business wants to purchase my goods wholesale in order to resell them.

But like I said earlier, the VAT registration requirement, and the tax regime in general, is the highest barrier to market entry I’ve encountered in my 5 years in this business. As a result, UK customers are likely paying significantly higher prices on a much smaller selection of goods and services because smaller overseas sellers are unable to navigate the tax system to be able to enter the market.

It’s a problem when the total delivered cost of imported goods fulfilled by Amazon to UK customers is roughly the same as when buying directly from the US or Australia, where shipping costs are prohibitive for individual orders.

And now Brexit will probably introduce further complexity to an already paralyzed market. Yikes!


#32

If there is a genuine demand for your product then the 20% price difference is not going to stop sales, especially if they are “highly specialized” and unavailable from UK sources.

You are already outside of the Eurozone, so Brexit should have no ill effects on your ability to sell over here, it may even have a positive effect if European markest become more difficult for the UK


#33

Brexit affects me because my Euro sales are split between UK and the EU roughly 50/50, and I am such a small seller that import costs, tax administration like filing fees, and other overhead associated with split markets are a significant factor.


#34

I’m a UK seller selling on US, Canada and UK using FBA here.

With VAT, yes, you have to bump your price up 20% and pay this to the government. If Amazon charge you any VAT on their services, deduct this on the return.

VAT is much simpler than the US sales tax I file for 26 states due to physical and economic nexus (Wayfair vs S Dakota). Most are quarterly but some are monthly. Some have more than a hundred counties and cities, each with different tax rates. I manage to file them, but it’s a headache as I’m just a sole trader. I don’t mind doing it because I think it evens the field between me and local sellers.

I’m sorry to hear you’re having trouble with VAT: I can point you in the direction of an accountant, and at least VAT returns are quarterly and don’t have local variations.

I wish the onus was on Amazon to collect and pay the tax: it’s happening in a few states in the US but it’s hitting smaller sellers hard.


#35

That only applies to states which have passed Market Place Facilitator tax laws. There are many states which are still demanding individual sellers to pay up, California being a noteable example as they have just started sending out tax demands.

Sales tax isn’t as stright forward as you make out, it’s a huge can of worms. Some argue that since Amazon take the payment and have so much control over the sale, they are actually the retailer. Others say the law only requires them to pay tax in their own state, while others say the tax is unconstitutional as it represents a unfair burden if one were to comply with all the possible 10,000 tax juristdictions.

One thing is certain, whether it’s VAT or sales tax nothing is made easy for us.

Regarding your own situation, another possibility might be to register as a UK business. That way you wouldn’t have to go VAT registered until your sales were £85,000 or more. The only down side if you did that is that you wouldn’t be able to sell in the rest of Europe, as you need to be VAT registered in the UK first before you can register in the other EU countries.

Having said that I think the laws on that are due to change next year so it might make things easier. However, Brexit developements might make that a non-starter.


#36

Hello,

I am a foreigner and I sell in UK. I tried to get a VAT number and already registered on HMRC. Do you have any idea how it works? as amazon UK is asking for a VAT number.

Thanks


#37

That’s good to know! Do you have any links for this info so I can read up on it?


#38

You mean, for the last remaining few weeks?
(Actually, no idea if Amazon comes up with some clever plan, if everything goes down the drain…
If targetting whole Europe, it might be a better idea to find a distributor in UK and somewhere in the EU, as tax stuff will become more and more difficult within the next couple of months.)


closed #39

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