Let’s start by talking a bit about what VAT (Value Added Tax) is: it is levied on products and services that are sold either by self-employed or companies. VAT on Amazon sales is present from the purchase of materials and services needed to develop the object to be sold, until the moment in which the final product is taxed with VAT and ends up being paid by the final consumer.
In this case, whoever sells the item or service is only an agent that collects this money and must report it to the Tax Agency of their country. How does it work exactly? In this article, we tell you how the VAT is applied in sales through Amazon in the EU since in recent times e-commerce has been an important source of income in the region.
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When is charged the VAT on Amazon sales?
Amazon has already established regulations for each case of sale on the platform. In this case, if we focus on sales and purchases within the European Union, Amazon only charges the VAT rate if the following is met:
“In accordance with EU Value Added Tax (VAT) legislation, Amazon will calculate and collect the European VAT applicable to monthly subscription fees and the fees for selling on Amazon, from sales made by sellers who meet the following criteria:
- Not having an EU VAT registration number.
- Be a resident of an EU country.
- Selling on a non-EU website.
Sales made with an EU VAT registration number may be subject to VAT collection through a chargeback mechanism.” So dictates Amazon’s official website in its VAT Registration and Information section.
Only in these cases will it be mandatory that the products are sold with VAT and the VAT rate corresponding to the country of shipment will be applied, as stipulated by the platform in the following text: “The final price of your order may vary depending on the VAT rate applied to the order. For orders destined for other European Union countries, the Spanish VAT will be deducted and the VAT rate corresponding to the destination country will be applied. The final price will appear during the confirmation of your order and reflects the VAT rate corresponding to the country of destination of the products”.
Invoicing without VAT
Now, there is also the option to invoice without VAT. Yes, you read that right, you can invoice without VAT if you meet a couple of requirements and by registering with your country’s tax office to obtain a VAT number if you belong to the European Union.
Amazon states in its regulations: “If you make a purchase with your VAT number from an EU member state and request to ship your order to an address in the European Union, we will automatically issue a VAT-free invoice… In such cases you are responsible for preparing and submitting to your local tax office the relevant VAT return(s), as well as any other tax obligations you may have, in accordance with the legislation in force in your country and in the European Union”.
Invoicing and being able to buy or sell
So far, you already know different ways to invoice with or without VAT on Amazon. The first one is invoicing with VAT if you do not have a VAT number of the European Union, which is requested in the register of intra-community operators and is a complex process that can take a few days. You may be asked for some documents to prove that you will sell or buy products in other EU countries and with this you get the number.
If you do not have it, you must invoice with the VAT of the country to which you are going to send the product and you will have to report to the corresponding countries the collected value.
The second way is to invoice with a VAT number. This case is very simple: you put on your invoice the assigned VAT number of the European Union, verify that the person who bought from you also has this number, and make the invoice without charging VAT on it.
Finally, it should be noted that we are talking about sales between EU countries. But if you are making sales within the same country, for example in Spain, the general VAT rate will be applied because it would not be an intra-community sale and you would make the collection, the normal process of VAT collection and the due report to the Spanish Tax Agency.
These issues can be a little complex to understand, so it is always better to be advised by experts in the commercial area to prevent you from the risks of violating any rules and being subject to penalties. A bad procedure or incorrect invoicing can be understood as an omission of information and tax evasion by the Tax Agency, and it is not something that you want to risk.
Do you need more information about sales through Amazon in the EU?
At Entre Trámites we offer various services of management, advice, and support in bureaucratic procedures for self-employed, SMEs, and other types of companies. Contact us! Through our contact form, you can leave your details for us to call you, schedule a free consultation, or simply text our WhatsApp.