Expanding into the European marketplace can be a challenging and complicated process with many elements that require co-ordination such as logistics, translations, currencies and VAT. Many Amazon sellers do not even consider their tax implications before making a shipment and driving a sales strategy. We can all relate to this, knowing that the most exciting parts of expanding your business come first and the mundane legislative parts can often be ignored.
Burying your head in the sand when it comes to taxes is the worst thing to do as you can be hit with large unexpected penalties and liabilities in the future. Europe is now catching up with non-compliant e-commerce sellers and we are seeing many VAT investigations coming into play, targeting sellers who are not abiding EU VAT regulations resulting in bankrupt businesses.
The Amazon PAN-European program triggers complex VAT filing obligations as it requires sellers to complete returns in a minimum of 7 countries as often as every month. With the Pan-European FBA program, sellers can ship their inventory to UK fulfilment centres and allow Amazon to then distribute the stock throughout their fulfilment centres in Europe based on anticipated demand. The initial benefit of this is lower shipping costs by directing one large shipment to a centralised country and leaving Amazon to complete the rest. Amazon has more than 25 fulfilment centres distributed across 7 European countries (UK, Germany, France, Spain, Italy, Poland and Czech Republic). This fluidity of stock leads to faster shipping times, lower delivery costs and the ability to participate on Amazon Prime. From a consumer’s perspective, and living in an impatient society, your buyers are more likely to purchase products that are quickly attainable rather than buying a product that is being stocked in a far away country that will inevitably take longer to receive.
With all the positive elements of this program there is the already discussed VAT obligations to consider, as your products will be stored in multiple countries and therefore changing the place of supply. Although Europe is currently operating under a single market, as soon as your stock is being fulfilled from a country this gives rise to a VAT obligation, meaning you will need to pay VAT to that country’s tax authorities. The solution is to find reliable VAT specialists who can complete the VAT registrations and ongoing compliance whilst being available for communication. The reason we stress the importance of good communication is due to each country having separate requirements for registration, filing frequency, VAT rates and payments which can be impossible to navigate without an experienced advisor.
Although Amazon storing your stock across Europe requires 7 separate VAT registrations, do not assume that this involves connecting with 7 different solution providers in 7 languages! There are tax agencies available who can co-ordinate each country and look after your whole VAT account within Europe, making this a seamless and simple option.
The analysis of whether this program is cost effective for your business is an essential part of expanding into Europe as this is not the only option for selling on Amazon EU. We advise contacting a VAT solution provider to discuss your options and the associated fees to complete your VAT compliance. If you are looking for a quick start, then fulfilling from one country and obtaining a single VAT number will ensure you are compliant without added hassle and fees. However, to grow your business and provide a competitive customer experience, enabling the Pan-European program should be considered for implementing in the future.
AVASK Accounting and Business Consultants are a fully dedicated and dynamic team of accountants, tax advisors and VAT experts. For companies considering global expansion, understanding tax obligations in Europe can be incredibly complex and distracting. AVASK are here to make your European expansion seamless by reducing administrative burden, leaving you to focus on your core business.
Our firm specialises in Amazon sellers and have assisted hundreds of e-commerce businesses across the world. We are fully committed to providing your business with the best service possible concerning UK Incorporations, Accounting & Bookkeeping, European VAT & Tax Services and Trademarks & Patents. Please visit our website to get in touch: www.ukvat.uk.com
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