Amazon has a huge number of customers from all over the world. Therefore, no one is surprised by the interest of entrepreneurs in listing and selling their goods on this platform. In today’s publication, we will highlight how sales on Amazon are accounted for, which will also help understand the details of the transactions in the context of changes to the e-commerce industry from 1 July 2021.

Amazon FBA platform – table of contents:

Amazon warehouses

Selling via Amazon is an interesting solution for companies that do not have their warehouse and do not want to deal with the packaging of goods, logistics, and handling of returns. Everything has its price, of course, including tax settlements. Amazon has warehouses all over Europe: Germany, Poland, Czech Republic, Spain, France, Italy and the Netherlands. This location advantage makes it possible to send goods from warehouses located all over Europe. Depending on the model of cooperation established with Amazon, VAT settlements may look slightly different. We will be interested in the Amazon FBA model.

Selling on Amazon under the FBA model

A trader who decides to ship his goods from different warehouses located in Europe will settle the transaction under the FBA (Fulfiled By Amazon) model. A seller who decides to cooperate in this way must be aware that Amazon freely moves goods between different warehouses. This will have a decisive impact on the VAT to be paid in this case in different EU countries. However, to comply with the tax obligations, you will be informed by Amazon about the transfers made between warehouses in a given accounting period.

Fulfiled By Amazon infographic

How do I account for sales on Amazon under the FBA model?

Hypothetically, goods could end up in all of Amazon’s warehouses, which means in every country where it has them. What does this mean for the entrepreneur? Well, in this case, the entrepreneur must register for VAT in each country from which the goods were sent to the recipient. This is undoubtedly a rather burdensome and expensive obligation. In such cases, we must use the services of a tax representative established separately in each country. Registration must be done both for VAT and VAT-EU, which is necessary to settle intra-EU transactions.

Clearing of intra-EU transactions in the FBA model

When accounting for sales on Amazon under the FBA model, these transactions are to be dealt with:

  • Intra-Community Delivery of Goods (ITA)
  • Intra-Community Acquisition of Goods (ICT)

    • Intra-Community Delivery of Goods may be documented with a VAT invoice, where the same entrepreneur is a party, but with different VAT-EU numbers. However, you should not forget that to apply a 0% VAT rate it is necessary to meet all the requirements of the VAT Act. It means, among others, having documents confirming the delivery of goods to the territory of another EU country.

    Intra Community Acquisition of Goods must also be accounted for on the other side as a WNT in another EU country. Also in this case the same entrepreneur will be a party to the transaction and must settle it and show it in appropriate VAT registers and declarations in another EU country. The VAT rate applicable in a given EU country shall be adopted for the settlement. Such a transaction is referred to as a non-transactional VAT transaction.

    Taxation of sales in a given country.

    Additionally, the tax representative of the entrepreneur has to settle all transactions made in a given settlement period with its consumers. The sales will be listed in VAT registers and declarations following the regulations of the relevant EU country. Naturally, VAT will be charged on the transactions at the rates applicable in other EU countries. Now we know why it is necessary to register for VAT in different EU countries.

    Summary

    Selling on the Amazon platform in the FBA model has many advantages for the entrepreneur, but he must not forget about additional obligations. Undoubtedly, a serious burden for the entrepreneur is the obligation to register for VAT in the EU country from which his goods are sent to the buyer. The decision to sell on Amazon in the FBA model should be well considered by the entrepreneur and should include additional costs associated with the settlement of VAT in other EU countries by the tax representative.

    Author: Agnieszka Markowska-Szmaj

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