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 your business needs.
Background
In July 2024, Amazon announced a change in the VAT treatment of fees for UK sellers, that would come into effect from 1 August 2024.
Previously, UK VAT-registered sellers paid VAT only on UK advertising fees billed from London, with other fees billed from Luxembourg under the Reverse Charge Mechanism. Generally, tax rates for UK VAT-Registered sellers were as follows:
UK Advertising Fees - 20% VAT on Expenses
EU Advertising Fees - Reverse Charge Expenses
FBA Fees - Reverse Charge Expenses
Merchant Fees - Reverse Charge Expenses
Now, Amazon will bill all fees from within the UK, for the EU and UK regions, meaning sellers will be charged VAT directly and need to reclaim it on their VAT returns.
This change affects FBA fees, merchant seller fees, subscription fees, and Amazon shipping fees (with the exception of 3rd party shipping providers). Advertising fees will remain the same as before 01 August 2024. Find out more about the changes from Amazon here.
These updates affect all businesses established in the UK, Germany, France, Italy, Spain, the Netherlands, Poland, Belgium, and Sweden.
What has been the impact of these changes?
There have been some important developments regarding the VAT treatment of Amazon fees, following changes that took effect on August 1, 2024.
Initially, it appeared that all Amazon FBA fees across the EU/UK would be subject to 20% VAT. However, after reviewing the invoices for August across multiple sellers, we’ve noted the following on UK accounts:
Merchant Seller Fees: invoices generally include VAT at 20% for all marketplaces, with the exception of Amazon.com.tr and Amazon.pl which generally include local VAT
FBA Fees: UK accounts that sell into the EU/ROW and use FBA are generally seeing two invoices for FBA fees, one Zero-Rated and one with 20% VAT on Expenses
Additional Credit Notes and Invoices for the August 2024 period: During the transition period, Amazon has issued several credit notes and back-dated invoices in some seller accounts, covering earlier periods with different tax treatments. For example, an FBA fee from July 1st would be categorized as a Reverse Charge Expense. As a result, sellers with FBA invoices may encounter mixed tax rates on the same types of fees during the August 2024 period
More Detail on FBA Fee Splits
While examining the data in the Amazon Tax Document Library, we observe that the split we see between FBA 20% Fees and FBA 0% Fees is related to arrival and departure country. This is as follows:
Orders shipped from GB warehouses to GB customers are subject to 20% VAT.
Orders shipped from/to other locations are subject to 0% VAT.
Note: Rather than citing the Reverse Charge Mechanism (as they would prior to 01-Aug), these invoices now refer to 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 that here. This leads us to believe that the most appropriate tax rate for these transactions is now Zero-Rated Expenses.
What if I am established outside the UK or sell on other Amazon regions?
If you are based outside the UK but selling into the UK and/or EU and hold VAT registrations in those areas, you may still be affected by the changes, though it's unlikely you'll encounter the same scenario described above. For example, if you're based in Germany, Amazon will likely charge you German VAT on fees, and you won’t generally face issues with GB splits on FBA fees, as that relates to UK-specific legislation.
Similarly, if you’re selling in non-EU/UK Amazon regions, these changes should not impact you. This primarily concerns VAT treatment on fees within the EU and UK Amazon marketplaces. Please reach out to our friendly support team if you find yourself in this situation and would like to discuss it further.
What will my tax rates look like going forward?
Based on our current understanding, we believe that the following tax rates will be the common treatment for most UK VAT-registered sellers:
UK Advertising Fees - 20% VAT on Expenses
EU Advertising Fees - Reverse Charge Expenses
Merchant Fees - 20% VAT on Expenses
FBA Fees -
GB > GB - 20% VAT on Expenses
GB > ROW or ROW > GB - Zero Rated Expenses
What does this mean for my August and September numbers?
The variance in VAT treatment for FBA fees across different marketplaces introduces complexity into the bookkeeping process. It’s possible that VAT on FBA fees, merchant seller fees, subscription fees, and Amazon shipping fees (excluding third-party shipping providers) hasn’t been correctly split out in your August and September entries.
You might have transactions that relate to the period prior to August 2024.
You could be experiencing a split between domestic GB FBA fees and international FBA fees.
As it is not possible to apply two different tax rates to the same transaction at one time in A2X, we suggest using a workaround method. This approach should allow your data to come within an immaterial difference of the total VAT reported by Amazon. The A2X Customer Success team is available to assist you with this process, you can book a dedicated support call via this link.
Although this method may seem more thorough than necessary, we recommend it to ensure the accuracy and credibility of your data for the August and September period.
We also advise consulting with your accountant, bookkeeper, or VAT advisor, as these changes may affect your business differently.
What’s Next?
A2X is actively working to resolve this issue, and we are confident in finding a solution. Our development, product, and customer success teams are collaborating with UK accounting, bookkeeping, and Amazon partners to address it.
We believe Amazon is also expected to release a new report that will give sellers a monthly overview of the tax treatment for fees. While this report is not yet available, it will be invaluable for navigating the new complexities once released. As soon as it goes live, we will provide instructions on how to locate it in your account.
The updated process will likely require new account and tax rate mappings. We will keep you informed of our progress and notify affected customers via email when an update is ready.
If you have any questions in the meantime, please contact our customer success team, or book a dedicated support call via this link.