Is registration required for VAT for non-EU sellers using Fulfilment by Amazon in the UK?
This has been in the news recently and HMRC may have lost £2bn in recent times from non-EU sellers who have illegal evaded VAT and have recently announced methods of enforcing the VAT.
This is a tricky subject and can get very technical as many words used in the tax legislation have very specific meanings and there are also court cases about the VAT treatment, so this post is a very basic and simplified overview. Please see the video below for further details. There may also be corporation tax considerations if selling to customers based in the UK.
If sales have a place of supply in the UK and involve consideration and are not exempt, then they will be taxable supplies.
The place of supply largely depends on the location of the goods and the identity of the importer. If the importer is also the supplier, then they will have to pay UK VAT when the goods are imported into the UK. This is because a non-EU seller who ships goods to Amazon’s Fulfilment Centre are the consignee and will be the importer and retain legal title over the goods.
Only once the goods are in the UK can they then be sold to customers via Amazon’s website. As the goods are in the UK at the time of purchase by a UK customer, the place of supply will be the UK under the VAT Act 1994 s.7.
For the purposes of VAT for non-EU sellers if they don’t have a business establishment in the UK they will be treated as a Non-established taxable person (NETPs).
If an NETP makes ANY sales, it has to register for VAT.
Therefore, all the criteria will met for VAT to be charged on sales under the VAT Act 1994 s.4, and registration for VAT for non-EU sellers will require the collection of 20% output VAT in their fixed prices charged to customers. They’ll then need to pay this 20% to HMRC, although they can offset the related input or import VAT.
Please contact us for further information as there are a number of tax issues and court cases to be considered. For example, we recently wrote a very long memo on similar VAT and tax issues for a non-EU client.