Amazon FBA & VAT –
Everything online merchants need to know
What is Amazon FBA? How does it work in cross-border trade with VAT? FBA storage abroad? Find answers and tips here. In addition to the benefits, we also present alternatives to the services offered by Amazon FBA.
What is Amazon FBA?
The abbreviation FBA stands for “Fulfilment by Amazon”. In this programme, sellers have the option of handing over the entire logistical order processing to Amazon. This can include storage in Amazon’s logistics centres, shipping, returns processing, VAT application and customer care.
VAT on sales via Amazon FBA
By selling goods via Amazon FBA, the merchant is classified as an entrepreneur for tax purposes. It follows that e-commerce merchants must comply with some tax obligations at their home location, the so-called “domicile state”. The following tasks must therefore be completed. These include registration with the tax office as an entrepreneur for VAT purposes, the regular submission of advance VAT returns, the annual submission of annual VAT returns and, in the case of B2B sales to other EU countries: submission of recapitulative statements.
The period for filing advance VAT returns is generally the quarter. However, suppose the VAT on sales in the previous calendar year was more than 7,500 euros. In that case, advance returns must be submitted monthly. There are additional special regulations for start-ups. If the shipments exceed certain value limits, “intra-trade statistics (Intrastat)” must additionally and regularly be submitted to the Federal Statistical Office (Statistisches Bundesamt).
VAT Calculation Service (VCS)
The Amazon Invoicing Service – “VAT Calculation Service” (VCS) – offers two ways for merchants to provide invoices with correct VAT to buyers:
Fully automated invoice generation (incl. correct VAT calculation) and transmission by Amazon. The buyer can retrieve the invoice in his Amazon account.
Amazon VCS Lite
Invoicing in your own shop system, ERP or invoicing tool. Amazon takes care of the correct calculation of the VAT. The buyer can retrieve the invoice in his Amazon account.
Amazon FBA Warehouse Abroad – Tax Regulations
Amazon moves the goods from Germany to foreign logistics warehouses (e.g. Poland and the Czech Republic). The goods are then delivered from these warehouses directly to the end customers. This results in either taxable domestic deliveries, tax-free domestic market deliveries to entrepreneurs in other EU countries or deliveries for which the regulations on mail-order trade apply. In this case, the two goods movements must be considered separately for tax purposes.
Delivery from “Amazon Domestic” to “Amazon Foreign”
The movement of the goods by Amazon from Germany to the foreign warehouse as a “transfer without legal transaction” meets the tax requirements of an “intra-Community transfer”. The movement of the goods from Germany to a foreign country constitutes a supply for tax purposes (§ 3 UStG), which is only exempt from VAT in Germany as an intra-Community supply under certain conditions.
The seller must prove all conditions of the tax exemption. In particular, a VAT identification number of the foreign country is available at the time of delivery to the foreign warehouse.
Delivery from the “Amazon Abroad” warehouse to the private “end customer”
If the goods are sent to the end customer by Amazon from another European country (e.g. Poland or the Czech Republic), further delivery is needed. According to European VAT law, the goods are generally subject to VAT in the country from which they were shipped, i.e. if Amazon ships the goods from its warehouse in Poland, this delivery is usually subject to Polish VAT (23%). This applies even if the private end customer and the seller are both residents in Germany.
Registration obligations abroad
Participation in Amazon’s “Central Europe Programme” and/or “Pan-European Shipping” therefore requires tax registration in Poland/Czech Republic (as well as Great Britain, France, Italy and Spain, if applicable). In addition, depending on the country, periodic (monthly, quarterly, annually) reports must be submitted to the respective tax authorities.
On 01.07.2021, the local delivery thresholds were replaced by a uniform, EU-wide delivery threshold of 10,000 euros net. The vast majority of FBA traders with foreign shipments will quickly exceed this threshold. As a result of abolishing local delivery thresholds, traders will regularly have to pay tax on their sales in the state where the end consumer is located.
All details on the new VAT regulations from 01.07.2021 can be found in our newsroom article.
Amazon FBA Services and extensions
Amazon Seller Central is Amazon’s sales platform. It offers merchants, so-called “third-party sellers”, the opportunity to provide products for sale domestically and worldwide. Storage and delivery can also be handled via Amazon, and the existing payment options can be used. We introduce you to Amazon FBA programmes and functions.
Seller Fulfilled Prime (SFP)
In the Seller Fulfilled Prime (SFP) programme, the seller takes care of the storage of the goods in its warehouses or a 3PL fulfilment service provider and shipping to the customer. This also includes the handling of returns.
Fulfillment by Merchant (FBM)
In the Fulfillment by Merchant (FBM) programme, the seller takes full responsibility for goods storage and shipping. With FBM, sellers can store and ship items themselves or hand over fulfilment to a 3PL fulfilment service provider.
Amazon PAN EU
Amazon’s Pan-EU programme extends the FBA programme and enables merchants to offer and store their products on all Amazon marketplaces in Europe. The following marketplaces are currently available: France, Italy, Spain, the Netherlands, Poland and Sweden. Tax registration in the selected countries (Poland, Czech Republic, Great Britain, France, Italy, the Netherlands, Sweden and Spain) is required. In addition, depending on the country, periodic (monthly, quarterly, yearly) reports must be submitted to the respective tax authorities.
Amazon Global Selling
The Amazon Global Selling programme enables merchants to sell their products worldwide. Marketplaces include the US, Canada, Mexico, the UK, Italy, France, Spain, Australia, Japan, China and India. Amazon assists sellers with product listing, currency conversion, international fulfilment, customs and tax issues, and customer service.
Amazon Small and Light
The “Small and Light” shipping programme is an option for small and light products with a maximum price of €10 (including VAT).
Central Europe Programme
With the expansion of the logistics network (Central Europe programme), you can store stock in the Amazon logistics centres of Poland and the Czech Republic that would otherwise have been stored in Germany. Tax registration in the selected countries (Poland, Czech Republic, Great Britain, France, Italy, the Netherlands, Sweden and Spain) is required. In addition, depending on the country, periodic (monthly, quarterly, yearly) reports must be submitted to the respective tax authorities.
What merchants must pay attention to when using the Amazon FBA programme
Many merchants use the Amazon FBA programme. But which advantages and disadvantages should be considered?
The OSS procedure – VAT on pan-European supplies
On 1 July 2021, the VAT liability for cross-border sales of goods changed for merchants due to the entry into force of the VAT digital package. Find out here about the changes in B2C distance selling that are also important for Amazon FBA merchants.