VAT on UK & EU Amazon FBA and Seller Fees Effective August 1st, 2024
There is an important change coming down the pipeline from Amazon that could impact your business if you’re based in the UK, or EU. Starting August 1st, 2024, Amazon will start adding VAT to their FBA and Seller fees. This change might not have made waves yet, but it’s something you definitely want to be prepared for.
What’s Changing?
Right Now:
Amazon doesn’t charge VAT directly on FBA and Seller Fees. Instead, since these services are billed from Amazon Services Europe S.à r.l. (ASE) outside the UK, you’ve been using the reverse charge mechanism to handle VAT.
From August 1st, 2024:
Amazon will start invoicing these fees through Amazon EU S.à r.l. (AEU).
For those of you in the UK (and a few other European countries), this means VAT will be added to your FBA and referral fees.
Why It Matters
If you're VAT-registered, you can still reclaim this VAT. But the problem comes with cash flow. There will be less money coming out of Seller Central since you won't get that VAT back until your next VAT return.
Example : A product retailing at £29.99 inc VAT selling`100 units a month.
Before August 1st:
FBA Fee per Unit: £3.05
Referral Fee (15.3% of £29.99): £4.58
Total Monthly Fees for 100 Units: (100 x £3.05) + (100 x £4.58) = £305 + £458 = £763
After August 1st:
FBA Fee per Unit (Including VAT): £3.05 + 20% VAT = £3.66
Referral Fee per Unit (Including VAT): £4.58 + 20% VAT = £5.50
Total Monthly Fees for 100 Units (Including VAT): (100 x £3.66) + (100 x £5.50) = £366 + £550 = £916
Impact on Cash Flow:
Monthly Increase: £916 - £763 = £153
This £153 is the VAT that you’ll pay upfront but can reclaim on your next VAT return.
For Non-VAT Registered Businesses
If you’re not VAT-registered, you’ll now face an extra 20% on your fees. This might be a good time to consider voluntary VAT registration to reclaim that VAT.
What You Should Do Next
Check Your Cash Flow Forecasts:
Adjust your forecasts to account for the additional 20% VAT on your Amazon fees.
Make sure you have enough funds to cover these increased costs until you can reclaim the VAT.
Talk to Your Accountant:
Have a chat with your accountant to make sure you’re all set to handle these changes.
Update your accounting system to deal with the new VAT charges from Amazon.
Consider VAT Registration:
If you’re not already VAT-registered, weigh the benefits of registering so you can reclaim VAT on these fees and other expenses.
This change from Amazon is pretty significant, especially for your cash flow. By staying informed and preparing in advance, you can make sure your business continues to run smoothly without any hiccups.
Read Amazon’s announcement.
Disclaimer
This information is provided for general informational purposes only and should not be construed as financial or tax advice. We are not accountants or tax advisors. Please consult with a qualified professional for advice specific to your situation
