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European VAT related knowledge

European VAT related knowledge

sofreight.com sofreight.com 2023-09-21 11:50:23

With the popularity of cross-border e-commerce, more and more sellers are entering the Amazon platform, and the European market, which is a major share of Amazon, is attracting many sellers. If you want to make a fortune on Amazon Europe, you must understand the importance of European VAT tax and make a compliant VAT declaration.


one. What is European VAT:


European VAT mainly refers to five countries: Germany, Italy, the United Kingdom, France and Spain. VAT stands for value added tax, which is a turnover tax. This turnover tax is a tax levied on the capital increase of taxpayers in their production and business activities.


Taking the UK as an example, when clothing enters the UK, clothing suppliers need to pay import taxes. This import tax is mainly import value-added tax, also called import customs value-added tax.


When the sales of this batch of clothing are completed, the clothing supplier can apply for a refund of the import VAT as input tax, and then charge the corresponding sales tax based on the sales volume. This is European VAT.


two. The importance of VAT tax number:


VAT tax number is the most direct company code for commercial activities. It is used for social credit binding of enterprises and tax-related records of enterprises. It is the only designated number used for import and export business and sales business. It is used to declare taxes and related matters for reporting companies. The only designated number for tax refund; it is also the only tax number that third parties can directly check for credit reporting; the VAT tax number is the only social code that assigns a designated number for tax payment.


three. VAT calculation method:


Import tax = import value-added tax (I MPORT VAT) tariff (I MPORT DUTY)


Import value-added tax I MPORT VAT = (declared value first leg freight DUTY) * 20%


Duty DUTY = declared value * product tax rate (different products are calculated according to different tax rates)


Sales tax VAT = (20% of the net sales price) or (one-sixth of the final grass sales price). The standard VAT tax rate is 20%. There are also zero tax rates and low tax rates. The zero tax rate is Coffee, baby products, etc.


Four. How to set a sales price for products:


Product sales price (tax included) = Product pricing (pre-tax price) sales tax VAT (customer borne) Product pricing (pre-tax price) = CIF price of goods customs clearance fees sales expenses profit CIF price of goods = original Purchase price at the place of origin first-way freight customs duties.


five. How to pay VAT:


After registering a VAT tax number, there are two ways to apply for tax refund (import value-added tax) and pay tax (sales tax VAT):


One is to self-declare using the UK tax department’s official online operating system;


The second is to designate a regular accountant to operate on your behalf;


The VAT value-added tax that domestic Amazon sellers need to pay to the British government is actually very small. They only need to pay the (sales tax VAT-import value-added tax) part. The sales tax VAT is already included in the product selling price and is borne by the consumer. of.


six. Under what circumstances need to pay VAT tax:


(1) The enterprise is established in accordance with the law in the local country.


(2) Store inventory in local countries and deliver goods from local countries.


(3) Deliver goods to local country customers from other EU countries where inventory is stored, and your sales to local country customers from all sales channels exceed the distance sales threshold.


(4) Ship from a non-EU country to a customer in a local country, and you (or the carrier on your behalf) are the importer of record.


seven. The impact of failing to pay VAT:


If you fail to declare and pay the tax payable on time, the relevant European national tax authorities will take punitive measures, such as imposing fines, late payment fees, interest, etc. in addition to the tax payable. If the relevant requirements of VAT regulations are not complied with, the IRS will also report the problem to the online platform where the transaction is located and require the online platform to take restrictive measures.


The Amazon platform will cooperate with relevant government departments to investigate sellers and accounts that may have VAT non-compliance to the extent permitted by law; and after receiving notification from the tax bureau, it will investigate sellers and accounts that are deemed non-compliant. Take restrictive measures, including removing goods from shelves, restricting listings, and prohibiting sales.


We would also like to advise sellers here that after the VAT tax number application is approved, please be sure to make tax declarations in a timely manner and declare once every quarter to avoid VAT tax number being frozen by the government. Report truthfully to ensure the safe operation of the store.