Disclaimer:

While we provide technical support to help with your bookkeeping processes, we do not offer tax advice. It’s important to consult with your accountant or tax advisor to ensure that the approach outlined here is appropriate for your specific circumstances. They will be able to provide guidance on tax matters to ensure compliance with local regulations and meet your business needs.

In July 2024, Amazon announced a change in the VAT treatment of fees for UK sellers, which took effect on 1 August 2024.

Since the change, we've observed data in the Amazon Tax Document Library and noticed multiple invoices being issued for the UK splitting FBA 20% Fees and FBA 0% Fees depending on the origin and destination of the order, as follows:

Note:

Instead of referencing the Reverse Charge Mechanism as they did prior to 1 August, these invoices now cite the following UK VAT legislation: VAT Act 1994 Section 7A(5) and Sch. 4A para. 9B. Zero-rated: item 5 Group 8 VAT Act 1994. You can read more about this legislation [here]. This suggests that the most appropriate tax rate for these transactions is now "Zero-Rated Expenses."

This update has been complicated and has required a lot of testing and research. Based on our findings and after consulting with UK VAT experts, the following tax rates should be applied for UK VAT-registered sellers:

If you're connected to an Amazon UK or EU account, and have VAT Jurisdiction Tracking enabled in Amazon and A2X, these transactions will now be split into ‘GB Domestic FBA Fees' and 'UK Marketplace FBA Fees'.

On your Accounts and Taxes page, there will now be new expense transaction lines that need to be mapped to reflect the correct VAT rates.

The following categories will be split by GB-Domestic:

Example: Order ItemFees FBAPerUnitFulfillmentFee GB-Domestic

The following categories will be split by marketplace, with Amazon.co.uk marketplace transactions being tagged ‘UK-Marketplace-FBA-Fees’:

Example: other-transaction Storage Fee UK-Marketplace-FBA-Fees

The reason they are split by marketplace instead of GB-Domestic is because they are expenses that are tied to an account or marketplace, rather than being tied directly to an order.

Using the marketplace to set the tax rate will likely be accurate 99% of the time, but edge cases are possible. If you suspect the marketplace doesn’t correctly reflect the transaction, please reach out to us.

To see this ‘GB Domestic ’ and marketplace breakdown (along with UK-Marketplace-FBA-Fees), you need to have VCS enabled in Amazon as well as the VCS setting turned on A2X. This means Amazon is calculating the VAT and charging it to the customer.

First, verify that VCS is enabled in Amazon

It is important to note: If VCS was not previously enabled in Amazon then the historical data will not have the tax documents A2X needs to be able to categorize the transactions based on GB Domestic.

How to enable in A2X:

Within A2X, this can be enabled under Settings > Registered Countries.

If VCS is enabled in Amazon, applying this setting will enable the Domestic and Marketplace breakdown in A2X.

There are new transaction lines and automapping rules will need to be mapped. You have two options for mapping these new transactions.

In this option, you will use A2X’s automated setup to reset your mappings, automatically apply the new tax rates, and enable the new automapping rules.

You can use A2X’s auto setup to reset your mappings, which will enable the new transaction lines, automapping rules, and automatically apply the new tax rates. This is the best option if you use A2X’s default settings and automapping rules, and you don’t have any custom mappings that you would like to keep. This will work for sellers who have standard-rated or zero-rated products.

To reset your mappings, select ‘Reset’ on the ‘Enable Auto Setup’ tile.

Reminder:

If you use the auto setup, your mapping will reset to A2X’s default accounts. If you have custom mappings that you would like to keep, then you may be better to select the custom setup option, and then select ‘Advanced’ (see option 1B below).

Once the new automapping rules have been created, we’d recommend checking the mappings and tax rates to make sure they’re applicable to your business and VAT registrations.

You will then need to refresh your settlements back to 1 August 2024, so that the new mappings are applied to your data. To do this, visit the ‘Settlements’ page. You can filter your data by date (1), apply the filter (2) then select all Settlements (3), and click ‘Refresh’ (4).

If you think you are seeing legacy transactions on your Accounts and Taxes page, please reach out to the Customer Success Team via chat, and we will schedule a mapping cleanup process for you.

If you have custom mappings that you would like to keep, but you would like to enable the new automapping rules, then you will need to reset the onboarding question and select ‘Custom’ and then ‘Advanced’.

It is important to note the following:

If you would like to keep your existing mappings and enable these new advanced rules, select ‘Update’ on the ‘Setup questions complete' tile.

Complete the onboarding question, then select ‘Custom Setup’.

Then select the 'Advanced' option.

Once the new automapping rules have been created, you will need to remap all of your automapping rules. Once you have done this, click save mappings.

You will then need to refresh your settlements back to 1 August 2024, so that the new mappings are applied to your data. To do this, visit the ‘Settlements’ page. You can filter your data by date (1), apply the filter (2) then select all Settlements (3), and click ‘Refresh’ (4).

If you think you are seeing legacy transactions on your Accounts and Taxes page, please reach out to the Customer Success Team via chat, and we will schedule a mapping cleanup process for you.

You need to start by refreshing your settlement data. This can be done by selecting all settlements and clicking ‘Refresh’.

This process may take time, so we’d recommend that you come back after an hour to complete the rest of the process.

Once you have refreshed your data your new transaction lines will be ready to map. Within A2X, visit the Accounts and Taxes page.

There are two parts to manually update:

Start by filtering the transactions within the affected mapping buckets:

Then map the transactions that are GB Domestic transactions.

Type Domestic into the Details field in the filters. This will filter a list of any transactions that have the new “GB-Domestic” tag

Here are some examples of how your filtered data may look depending on the transactions within your specific account.

Example with filter:

You then need to apply the correct tax rate to each transaction line. As a reminder, these are the VAT rates that could be applied to most sellers, however, we do recommend checking these with your tax expert.

The next step is to map the following categories, which will be split by marketplace:

Reminder: The reason they are split by marketplace instead of GB-Domestic is because they are expenses that are tied to an account or marketplace, rather than being tied directly to an order.

You can find these transactions by replacing the “domestic” tag with the “marketplace” tag under the details. This will filter a list of any transactions that have the new “UK-Marketplace-FBA-Fees” tag

Example with filter:

Map the appropriate tax rate and click ‘save mappings’. You can select the transactions and use the bulk mapping feature as shown below.

We’d also recommend checking the tax mappings for marketplaces outside of Amazon.com.uk and for non-GB Domestic expenses, to ensure they also have the correct tax rate applied.

With the selected transactions still in the details field, switch the apply the domestic and marketplace filters and select the “exclude” icon. Additional tip: select the ‘expense’ category pill at the top of the filters.

If applicable, update your non-Domestic and non-UK-Marketplace-FBA-Fees transactions to the correct tax rate.

Apply the correct tax rate to these transactions. In most cases, it would be ‘Zero Rated Expenses’, but we’d recommend checking this with your tax expert.

Map the appropriate tax rate and click ‘save mappings’.

As a final check, clear all filters and just select the “expense” pill category, to ensure all transactions have a tax rate that is appropriate.

Note: This list excludes advertising because that doesn’t need to be remapped.

Once you have updated your mappings, you may consider comparing your VAT on Fees in Amazon Seller Central, with what is recorded in your GL to ensure everything is accurate. This can be done by downloading Amazon's fee invoices.

When you are doing this, you will also need to keep in mind the recent change Amazon made to deferred transaction management, where payment for transactions can be delayed for seven days or more after their delivery date.

This could impact your reconciliations in that Amazon fees and charges for deferred transactions will be included in your tax invoices in Amazon, but won’t have been paid out (i,e., they have been withheld), meaning your sales values in Amazon and your GL could be different. You can check for deferred transactions in Amazon, by downloading the Deferred Transactions report in Seller Central. You would then need to manually add these numbers with the numbers in your GL, and then compare these to the total values provided by Amazon Seller Central. This support article provides an overview of how to account for Amazon deferred transactions via a reversing journal entry.

If you have any questions or need further assistance, our support team is here to help. We also offer one-off support calls to review your new VAT mappings. You can book a call here.