In this article we'll review how to account for VAT for Amazon sellers in UK and EU. Looking for information about Shopify VAT?
Disclaimer: you should get tax advice from your accountant or tax adviser, these instructions are for technical configuration of A2X.
There are several typical VAT scenarios for Amazon sellers that A2X is designed to help for VAT accounting.
- Single market seller - For example a UK business selling only from the UK and only registered in the UK
- Multiple VAT registrations selling only from a single country - For example a UK business selling only from the UK and registered in the UK and Germany.
- Selling from multiple countries with multiple registrations - For example a Pan-EU business registered in all 7 countries
- Manual VAT setup - for advanced users or specific scenarios
Below we’ll cover the basic setup for each scenario, you may need to customize or tweak these based on advice from your accountant or tax adviser. The purpose of these instructions is to get accurate VAT information from Amazon into your accounting system so that your financials and your VAT return are accurate. Handling of the additional VAT registered marketplaces is assumed to be outside of your accounting system (typically in conjunction with 3rd party VAT experts such as AVASK, Avalara, KPMG etc).
What you need to know
When setting up VAT for your Amazon accounting there’s a few key things you need to know:
- Does your business use Amazon’s VAT calculation service often abbreviated to ‘VCS’ (i.e do you price inclusive or exclusive of VAT)
- Is your business registered in multiple countries
- Is your business operating from multiple countries (i.e Pan EU)
1. Single market/country
This is the simplest configuration for an Amazon seller, all of your sales are taxable only in a single country (in this example United Kingdom).
2. Multiple VAT registrations, operating from a single country
When you are selling from a single country and registered in multiple countries, you'll add the additional registrations to A2X, the country an order is being shipped to will still be used for the sales grouping.
3. Multiple VAT registrations, operating from multiple countries (Pan-EU)
If you use Amazon's VCS, then you can enable VAT jurisdiction tracking, VAT calculations, and country grouping to fully account for VAT in each registered jurisdiction. Amazon Sellers taking advantage of Amazon's Pan-EU program would select this option.
You can learn more about using A2X for Pan-EU VAT.
For sellers who do not use Amazon's VCS, or who use VCS but manually calculate their own VAT using a different calculation method to Amazon - you can override the VAT calculation with A2X.
This will allow you to use a jurisdiction based on departure and arrival country, even if Amazon's calculated jurisdiction is different to what you use. To learn more read about overriding the Amazon VAT calculation.
4. Manual VAT Setup - advanced configurations
If you’re not using the VAT country grouping or jurisdiction tracking you can configure the groupings in A2X manually, and take more control of the groupings for specific types of products.
This is typically for advanced VAT situations and you should check with your accountant or tax adviser when using these settings. If in doubt please contact A2X support.
If you have specific products or sets of products that require special tax treatment, for example reduced rate or zero-rated products then you can use product types to group those product sales together for special VAT handling. You can read more about product types and how to configure them.
Here’s an example of using product types to track zero-rated products. First you would define the product type, in this case we're using SKU patterns, but you can also list the SKUs one-by-one for each product type group:
The transactions for those products would be grouped together and can have special tax rates applied:
Multi-national country grouping
If you specify one or more VAT registered countries then A2X will group the sales based on the country being shipped to if it is registered, or non-registered EU countries, and finally non-EU countries. If you do not specify any VAT registered countries then A2X will not make any specific groupings and you can manage accounting and tax for every country individually.
This might be necessary if you need to account for sales to other countries in special ways - for example a US company accounting for US sales alongside the UK/EU sales.
Overriding Amazon VAT
Some sellers may need to customize their VAT calculation for very specialized situations. To learn more read about overriding the Amazon VAT calculation.
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