Amazon sellers can reach more customers more easily thanks to a new program launched in Europe this week. “The new Pan-European FBA programme will help sellers export to millions of Amazon customers across Europe more efficiently than ever before,” an Amazon UK spokesperson told EcommerceBytes. But there’s an important caveat pointed out to us by a reader – the VAT tax issue.
Amazon’s announcement described the new program as a win-win for buyers and sellers. “This new service will help sellers of any size export to millions of Amazon customers across the EU more efficiently than ever before. Amazon customers in turn will be able to receive thousands of new products from sellers across the EU, whilst benefitting from faster shipping times and lower delivery costs.”
Amazon had already allowed FBA sellers to sell through its European Fulfilment Network. For example, sellers in the UK can ship and store inventory in a UK fulfillment center and fulfill orders from any Amazon European marketplace.
With the Pan-European FBA program, UK sellers can ship their inventory to UK fulfillment centers and allow Amazon to distribute it throughout its fulfillment centers in Europe based on anticipated demand.
And that, according to a UK seller who did not wish to be named, is where things can get tricky for the unsuspecting seller. “In the EU the VAT system works similar to the US sales tax nexus in that you are liable to pay VAT to each country’s tax authority you hold your stock in,” he explained. “With this new program, Amazon places your inventory in multiple countries and as this you become liable to register for VAT in those countries. This is expensive if you don’t speak Italian, German, French and Spanish as you would have to employ an intermediary company to firstly register your company in those countries and then file the returns.”
The problem is twofold. Sellers who are unaware of their tax obligations may get into hot water with tax authorities, he said. And those who intentionally evade VAT (many from China and some from the US, he believes) gain a roughly 20% price advantage.
The UK Chancellor of the Exchequer had harsh words for overseas VAT tax evaders in his 2016 budget presentation in March, and announced some initiatives for making online marketplaces such as Amazon and eBay liable for VAT fraud.
Andy Connolly at Radius told EcommerceBytes at the time that the UK initiative sought to close a loophole by requiring non-UK based merchants to appoint a tax representative within the UK in order to handle their UK-based VAT affairs.
How would a US seller find such a representative in the UK? “A number of companies operate these services on a commercial basis,” Connolly said, “and HMRC operates its own Non Established Taxable Persons Unit, although at this stage it is unclear if NETPU will be available for use by those who have been non-compliant.”
He pointed out that terms such as “online marketplace” would require some definition to clarify the extent to which operators such as Shopify and BigCommerce might be impacted. In addition, “Where overseas traders use UK-based warehouses as part of their fulfilment operation, HMRC are also to introduce a due diligence scheme to make it more difficult for VAT-evading businesses to operate.”
At the time, an Amazon spokesperson provided EcommerceBytes with the following statement: “We fully support VAT compliance by companies selling products through online marketplaces and offer tools and information to assist our sellers in their VAT obligations. We are currently reviewing the Government’s proposals, and we will naturally comply with any legislation.”
We’ve asked Amazon for comment on the VAT implications for its new Pan-European FBA program, but due to the time difference, its response is delayed.
It’s clear that aside from VAT issues, the new FBA program makes it easier for online merchants in Europe, including those in the UK. “Sellers do not need to worry about inventory placement, cross border shipping costs or fees for return of goods (even if they are cross-border) as we now have a pan-European fulfilment service,” the UK spokesperson explained. “Sellers will be able to deliver their entire EU inventory into a local fulfilment centre and Amazon will automatically ship these products across its European Fulfilment Network, according to the anticipated local customer demand.”
Tens of thousands of small and medium businesses already sell to Amazon customers across the EU, according to Amazon’s announcement on Tuesday. For example, Amazon UK sellers exported nearly 1.4 billion pounds in 2015. And in the first quarter of 2016, over 50% of EU sellers sold on more than one Amazon Marketplace in the EU.
Amazon has 29 fulfillment centers distributed across 7 countries in Europe, as well as Customer Service centers that are able to help customers in the local language of the five EU Amazon marketplaces.
You can find a guide to the new program on the Amazon website.