What Amazon Sellers Should Know About the New UK VAT Rules in 2021
As you may have heard, there are new UK VAT rules in 2021 that every Amazon seller should know about.
Effective January 1, 2021, the United Kingdom (UK) has implemented fundamental changes to the value-added tax (VAT).
This is not just limited to accounting and reporting requirements for businesses with a direct-to-consumer channel but also applicable to online sellers and marketplaces.
Similar VAT changes in the European Union (EU) will take effect on July 1, 2021.
The newly implemented rules will supersede the current arrangements for sales of goods to consumers in the UK and from the UK into the other countries under European Union (EU) (e.g., under the EU distance sales VAT regime).
As expected, these changes will have an impact on many businesses including:
- Any business selling goods to consumers in an EU Member State and/or the UK, directly or through an online marketplace
- Any business using a business-to-consumer (B2C) sales channel
- Any online marketplace (OMP) that facilitates the sale of B2C goods
- Freight forwarders, postal operators, and express carriers, among others
- Any business importing goods into the UK with a consignment value of less than £135 for sale to UK customers both on business-to-business (B2B) and B2C sales
Businesses affected by these changes must weigh and rise above the challenge. Associated systems, tax, commercial, contractual, and pricing implications must be taken into consideration fast and quick.
New UK VAT Rules 2021
Since the new ruling in VAT is now in effect, the following are the rules sellers must watch out for:
- Termination of low-value consignment relief for goods under £15
- All goods imported into the UK will be subject to UK VAT (at the relevant rate 0%, 5% or 20%).
- Goods in consignment imported into the UK is valued at less than £135
Also, it is important that the seller or the one facilitating the sale is VAT registered for them to charge UK VAT.
If the customer is VAT registered, its VAT registration number should be obtained by the seller.
In this case, the customer should apply the reverse charge (account for VAT itself on behalf of the seller).
Online marketplaces
Online marketplaces are not an exemption to the new rule. OMPs (regardless of where they are established) will also be liable for UK VAT on the following transactions:
- Sale of imported goods valued at less than £135 by UK or non-UK sellers
- Sale of goods (any value) by non-UK sellers if the goods are located in the UK at the time of sale
From July 1st, 2021, an Import One Stop Shop will be used for consignments valued at under €150. Note that the EU distance selling threshold will not apply to sales by UK sellers. These sales will become exports from the UK instead and imports into the UK by the customer.
New UK VAT Rules | Information from Amazon Seller Central
To make sure that Amazon calculates tax correctly, it is very important that you keep your account details accurate and updated. Failure to do so may result in incorrect VAT calculations and additional costs to your business. As a minimum requirement Amazon will have you provide them with your:
Settings > Account Info > Business information > Business address
Your business address is where you have registered your business and where its management is located. For non-business customers, this is your usual place of residence.
Note that Amazon may perform identity checks to confirm your business belongs and operates from this address so it is important that the address you provide must represent your primary place of business.
If Amazon is unable to verify your business address, this could lead to the suspension of your account until Amazon can successfully verify your details.
Settings > Account Info > Tax information > VAT calculation settings
VAT registration number is very essential. You should provide your VAT registration number issued in the same country as your business address and this will mark as primary. You will also have to provide VAT registration numbers belonging to your business in countries outside of your business address country. Failure to provide this VAT registration number might result in incorrect VAT charges.
In certain areas, local laws and/or regulations dictate that Amazon must gather the local VAT registration number(s) for the locations where you store your inventory or where you have gone beyond certain sales thresholds. Amazon may also require details of your other VAT registration numbers in order for you to participate in certain Amazon programs.
Settings > Account Info > Shipping and returns information > Shipping settings > General shipping settings > Default shipping address
Your business address is just as important as this address since they will determine the ‘deliver-from’ address for sellers participating in VAT Calculation Services (refer also to FAQ 4).
The address you provide must represent the primary address from which you self-fulfill orders and Amazon will use it to determine the originating jurisdiction for your sales.
Important Note: The information mentioned above is provided for general reference purposes only. It is not tax, legal, or other professional advice and must not be used as such. You should consult your professional advisers if you have any questions or need further detail.
VAT FAQs from Amazon
What happens if I do not have an up-to-date business address?
Keeping your business address updated will make you have smooth transactions. Failure to provide the correct business address could lead to incorrect VAT charging being applied on your Amazon fees and on your marketplace transactions where applicable.
If Amazon is unable to verify your business address, this could also lead to the suspension of your account until Amazon can verify your details.
If I change my business address, will it trigger an EU Marketplaces Know Your Customer (“KYC“) review (a.k.a. Seller Qualification Audit)?
Amazon is legally required to perform KYC checks for anti-money-laundering purposes. A change of business address may trigger KYC review if the updated address is a new address to Amazon. You may also be required to provide additional information related to this new address.
What are Marketplace Facilitator regulations and how can these affect my business?
It is important to keep your business address up-to-date mainly because this is one of the elements needed in the confirmation of your business address. Some countries are implementing Marketplace Facilitator regulations which only means that under certain conditions Amazon is liable to collect and remit VAT from customers in respect of your marketplace transactions.
What happens if I provided a default ship-from address which is not my actual ship-from address?
One of the factors that has a great impact on tax calculation is the default ship-from address. If your actual ship-from address is in a different country, this may lead to VAT calculation errors so the importance of keeping your ship-from address is very high. When Amazon calculates taxes for marketplace transactions, the total price (including VAT) is displayed to the customer at check out. This calculation is based on your VAT inclusive list price.
Final Thoughts
When you open or operate a Selling on Amazon account, it is essential that you provide Amazon with up-to-date information about who you are and where your business is located. These details are important to calculate tax on your Amazon fees correctly and may also use to calculate tax on your sales transactions if you signed up to the VAT Calculation Services program.
The post What Amazon Sellers Should Know About the New UK VAT Rules in 2021 appeared first on AMZ Advisers.
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