Over the years, Amazon Prime has garnered a lot of popularity. As an Amazon Prime member, one of its benefits is its same-day delivery offer. Studies report that 85% of Amazon Prime members visit Amazon at least once a week and 46% purchase within the time frame. As an Amazon seller, if you don’t sell on Prime, you are surely missing out on good sales.
The PAN European Fulfillment owned by Amazon (FBA) is designed to make Prime irresistible for businesses. When you sign up on Prime as a seller, delivering your product to the international market automatically becomes easier. While this comes with numerous advantages, the major drawback remains the requirements for VAT registration.
What is Pan-European FBA?
The Pan-European FBA is designed by Amazon for sellers who wish to extend their sales to the international market. With the previous FBA system, sellers’ products are sent to a single Amazon fulfillment center where the seller is located, from there, the product gets shipped to international customers. But with the PAN-European FBA, your product gets redistributed to seven European fulfillment centers, which include: Germany, Italy, Czech Republic, France, Spain, UK and Poland. Distribution is usually handled by Amazon, which helps your products get to their customers faster.
Another advantage is that it is cost efficient compared to when you have to sell to each country outside FBA. You save on the cost of shipments across borders, and only get to pay local fulfillment fees after each sale.
Key issues to consider on EU VAT
Are your customers based abroad?
Are you selling over the distance selling threshold?
Are you also using a foreign Amazon warehouse for holding stock?
My FBA VAT Obligation.
For online retailers of goods to consumers, the Fulfilment by Amazon service offers a quick and easy way to expand their market potential to the member states of the European Union and beyond. But selling across EU borders brings the responsibility to charge and remit Value Added Tax (‘VAT’) to each individual country.
Online market stores have been compelled to make sure sellers register for VAT in each European country. This is to ensure sellers do not beat the sales tax system. Due to this, businesses looking to apply for the Pan-European FBA must register for VAT within the seven territories where your products will be distributed. Due to this:
1.Customers are charged VAT rates in line with their location.
2. VAT records are kept for each territory.
3. VAT returns are filed for each territory.
All of this differ for businesses that use a single fulfillment center or EFN as products are only contained and shipped from a single country. VAT registration will only be needed in that country. However, thresholds for distance selling still applies.
What are the Alternatives to Pan-European FBA?
If a seller wishes not to participate in the Pan-European FBA, they can continue to leverage the European Fulfillment Network (EFN) for across the border sales. Though fulfillment fees in the EFN are higher than FBA, you get to benefit and enjoy from the distance sales thresholds in each country.
However, your business will not benefit from Amazon Prime for customers in EU.
For online retailers of goods to consumers, the Fulfilment by Amazon (‘FBA’) service offers a quick and easy way to expand their market potential to the 28 member states of the European Union and beyond. But selling across EU borders brings the responsibility to charge and remit Value Added Tax (‘VAT’) to each individual country.
To help understand the potential obligations and how to satisfy them, this section of Avalara VATlive provides some useful background on the EU rules for FBA. You can also contact us for FREE guidance on the rules, and our VAT experts can help you.