As an important step in compliant operations, sellers on Amazon European marketplaces pay close attention to matters related to European Value Added Tax (VAT). To help sellers understand how VAT is calculated and paid, this article uses the UK as an example to explain how to calculate and pay VAT when selling on Amazon.

Starting January 1, 2021, Amazon will be responsible for collecting and remitting VAT on sales for the following products ordered through Amazon stores and delivered to individual buyers in the UK:

Type 1: products shipped from inventory stored outside the UK, with a shipment value of no more than £135;

Type 2: products shipped from inventory stored in the UK, regardless of value, and your company is established outside the UK.

If any of the above conditions apply, Amazon will calculate and collect UK VAT from the buyer at checkout, then submit it directly to the UK tax authorities. You won't receive UK VAT amounts in customer payments, and you don't need to pay these amounts to the UK tax authorities.

Note: If products are shipped from inventory stored outside the UK to buyers in the UK, the VAT exemption on sales of products with a shipment value of no more than £15 was removed as of 01/01/2021. Amazon will calculate, collect, and remit UK VAT on sales of these products.

First, before calculating VAT on sales, you need to understand what shipment value is. Shipment value refers to the intrinsic value of a product during the shipping phase when it is sold and delivered to a UK buyer. This is equal to the price that the item is sold for, excluding:

For example, if you ship a shipment with three items, the value of the shipment is the total price the buyer paid for those three items, net of VAT and any separate shipping or insurance charges. For any Amazon shipment, if you ship one item, but that item is included in the same shipment as items sold by Amazon and other selling partners, the shipment value is the total price the buyer paid for all items, net of VAT, plus any separately charged shipping or insurance costs.

To comply with the new VAT regulations, Amazon will calculate and remit the VAT due on your eligible sales.

Prices listed on the UK Marketplace (.co.uk) will be treated as inclusive of UK VAT. Amazon will calculate the UK VAT due on your sales and withhold the appropriate tax from the amount collected from the buyer.

For shipments from outside the UK, Amazon will calculate the amount of the customer order excluding UK VAT to determine whether the value of the shipment is above or below the £135 threshold. If the value is at or below this threshold, Amazon will calculate the UK VAT due and withhold this amount from the amount charged to the buyer.

Amazon will not use any product tax codes you provide in this calculation. Your product tax code will continue to be used for sales of products for which you are responsible for paying VAT;

Prices listed on European marketplaces (.de, .fr, .it, .es, .nl, .se, .pl) will be considered to include VAT in the country where the marketplace is located. Amazon will calculate the price of the product without VAT based on the removal of VAT in the country where the marketplace is located, determine whether the price of the product without VAT falls below the £135 threshold, and if below that threshold, calculate UK VAT on the actual amount. The total amount including Norwegian VAT will be collected from the customer.

For example, the price of an item listed on the Amazon.de marketplace is considered to include any applicable German VAT. VAT is calculated as follows:

A selling partner listed a product for €119 (including VAT) on Amazon.de (product price €100 + German VAT €19), and the buyer purchased the product and provided a delivery address within the UK.

At checkout, Amazon will remove German VAT and collect UK VAT on the product price (product price €100*20%=€20). The buyer will pay the final price of €120 (original total price €119 - German VAT €19 + UK VAT €20 = €120)
Once delivery is complete, Amazon will transfer the net proceeds of €100 (product price excluding VAT) to your account (item price at checkout €120 - UK VAT €20 = €100)

Amazon will not use any product tax codes you provide in this calculation. Your product tax code will continue to be used for products on which you are required to pay any applicable VAT, such as products with a value exceeding £135 excluding VAT or products outside the scope of the regulations:

The above explains how to calculate VAT on sales on Amazon, using the UK as an example. We hope this helps. You can click the Amazon European VAT page and Introduction to VAT in European Countries to learn more about tax rates in European countries, VAT registration, VAT laws in European countries, and frequently asked questions about VAT regulations.