Last updated on October 9, 2019.
Contents
This document describes the methodology we apply to calculate VAT for Sellers using Amazon's VAT Calculation Services.
Amazon’s VAT Calculation Services will exclusively perform VAT calculations for the 28 European Union (EU) Member States on products sold on Amazon’s European/EU Marketplaces. The VAT calculations are performed based on Seller-determined tax settings and any other related Seller information set up during configuration. Amazon’s VAT Calculation Services do not perform VAT calculations in countries located outside of the EU.
Distance Selling: Both VAT Calculation Services and VAT Services on Amazon assumes Seller has opted for taxation in the country of arrival of their shipment as from the moment Seller possesses a valid VAT registration number(provided by the Seller in their Seller Central account). This implies that an EU cross-border sale of goods to consumers (distance sale) will always be taxed in the EU country of arrival of the shipment ('destination country') if a valid VAT registration number for that country is available.
The general VAT rules that apply on distance sales state that these sales are taxed in the EU country of dispatch of the shipment ('departure country') as long as Seller has not reached a certain threshold of distance sales performed to a specific EU country. However, it is possible for the Seller to opt to tax their distance sales immediately in the arrival country. Therefore, where Seller has not exceeded distance selling threshold for one or more of their VAT registered countries, Seller must ensure they have duly informed the relevant tax authorities to immediately tax their distance sales in the EU country of arrival prior to enrolling into VAT Calculation Services.
VAT Calculation Services: Amazon’s VAT Calculation Services utilises a third-party VAT calculation software, Vertex Indirect Tax O Series. This software contains VAT calculation rules and logic, including logic related to rounding of the calculated amounts. Amazon’s VAT Calculation Services support for the following VAT calculations and related functions:
Further information: This relates to instances where a Customer is VAT registered and established in the country where the transaction takes place for VAT purposes and the Seller is only VAT registered in this country (but not established). Countries that have implemented non -resident domestic reverse charge mechanism are Belgium, France, Italy, Netherlands and Spain.
A French VAT registered Seller who does not have a physical presence in France lists an item at € 12.00 on Amazon.fr, ships the items from France and sells the item to a B2B Customer located in France.
VAT rate = 0% (non-resident domestic reverse charge)
VAT exclusive item price calculation: € 12.00/ (1 + 0.20) = € 10.00 (Base price on which domestic reverse charge is calculated)
Final VAT inclusive item price calculation: € 10.00 * (1 + 0.00) = €10.00
Amazon's VAT Calculation Services do not currently support the following calculations and related functions:
Calculation of the Impuesto General Indirecto Canario (IGIC) in the Canary Islands (Spain)
Refer VAT Calculation Services – FAQs for list of EU territories which fall outside the scope of EU VAT rules;
Amazon's VAT Calculation Services rely on the accuracy of the VAT registration numbers, PTC (Product Tax Code), and other VAT calculation settings supplied or configured by the Seller and, if applicable, the VAT registration number supplied by the Customer. Sellers are solely responsible for ensuring that their information and settings are at all times accurate and up-to-date. Amazon does not represent or warrant that the VAT calculations or VAT invoices produced by Amazon's VAT Calculation Services will at all times be correct or that they will at all times be reported timely to the relevant Tax Authority (where the services include such reporting) and we are under no obligation to (but may in our discretion) verify or correct the information supplied by the Seller or the Customer. In particular, Amazon assumes no liability for VAT invoices which are incorrect as a result of inaccurate or incomplete information supplied by the Seller or the Customer.
Following are the requirements for a Seller to be eligible to enroll into VAT Calculation Services:
Amazon’s VAT Calculation Services will use all validated VAT registration numbers (EU28 only) in order to determine the jurisdiction in which the transactional VAT liability exists when selling on Amazon’s European marketplaces. VAT registration numbers can be provided during the VAT Calculation Services enrolment process and then managed from the 'Tax Information' section available in Seller Central under 'Account Info'.
Amazon performs validations (please see below) on VAT registration numbers supplied by both Sellers and Customers. However, Amazon cannot guarantee the validity of a VAT registration number used in its VAT Calculation Services at any time. Only valid VAT registration numbers granted by EU Member States will be used in VAT Calculation Services.
VAT registration numbers are validated via various methods:
VAT Calculation Services requires Seller's legal name in Seller Central to match exactly with the legal name associated with Seller's VAT registration number. Once Seller's legal name has been correctly entered and if a Seller likes a different 'Trading Name' displayed on their storefront then the Seller can achieve this by updating their ‘Display Name’ found under ‘Account Info’ in their Seller Central account.
If a Seller has a Group VAT registration number, and the company registering for VAT Calculation Services is not the representative member, Seller must provide their 'Certificate of Members' which states all of the Legal Company names associated with the VAT registration number. The legal name of the Company with which Seller registers on VAT Calculation Services must be shown on this Certificate in order to pass the legal name eligibility check.
The Vertex jurisdiction selection logic uses information from four transaction-related details to determine whether it is a B2B or B2C transaction as well as the VAT jurisdiction and tax type (i.e., VAT). The four transaction-related details are:
All the EU member state granted VAT registration numbers that have been supplied by the Seller under Account Info > VAT Information (also called as 'Place of Establishment Information' on certain marketplaces) in the Seller Central account.
All EU Member State granted VAT registration numbers that have been supplied by the Customer in their Amazon account.
5.3.1. Products shipped using Fulfilment by Amazon (FBA): Upon shipment of the product, the final VAT calculation will use the actual ‘Ship-from’ location (departure country) for shipments originating from an Amazon fulfilment centre.
5.3.2. Seller-fulfilled products for VAT calculation purposes: Seller-fulfilled shipments will use the ‘default Ship-from’ location (departure country) configured within seller’s VAT calculation settings.
The ‘Ship-to’ location is based on the Customer-supplied country, county/province, city and postal code as Amazon’s VAT Calculation Services will also handle VAT calculation for orders shipped to certain VAT excluded territories. Amazon’s VAT Calculation Services will calculate tax based on the tax location our system determines to have the highest confidence level as matching the Customer-supplied address.
The PTC is important in order to determine the applicable VAT rate on the products listed by the seller in the relevant country where VAT is due (tax jurisdiction).
As a system default, the standard rate PTC (A_GEN_STANDARD) will be set as the Seller default PTC once VAT Calculation Services are enabled. VAT Calculation Services will always apply the standard VAT rate on the products in each of the countries (for example, currently 19% in Germany, 20% in United Kingdom).
If a Seller wishes to change the system default position and assign another PTC, then Seller can do so by either changing the Seller-selected default PTC assignment within their tax settings, or by setting offer level PTC assignments. An offer level PTC assignment applies on an individual offer basis and can also be used to choose a PTC that is different from the Seller-selected default PTC. The Offer level PTC assignment will take precedence over the default PTC.
Please refer here for the list of specific PTC codes and associated VAT rates.
Sellers that have their ‘default Ship-from’ (departure location) address located outside EU, VAT Calculation Services will not generate VAT invoices or perform VAT calculations. The Seller will be responsible to create VAT invoices and account for VAT on all their self-fulfilled orders.
Amazon’s VAT Calculation Services utilises three primary components to support VAT calculations displayed during the listing of a product, order checkout and on the invoices:
Amazon’s VAT Calculation Services uses the Seller-provided tax inclusive selling price (“Display price”) and the logic described below, which is based on the Seller’s VAT registration status, to determine which VAT rate will be used to determine the tax exclusive price (“VAT exclusive price”).
Sellers are expected to provide an item display price targeted at customers in the local marketplaces (United Kingdom, Germany, France, Italy or Spain) on which they list their items. Therefore, generally, the calculation of VAT from the display price will be performed in the following precedence:
8.1.1. For business-to-business (B2B) transactions:
8.1.2. For business-to-consumer (B2C) transactions:
Following are some examples to demonstrate the VAT exclusive price determination methodology set out above. The standard German VAT rate (19%) and Polish VAT rate (23%) have been used in the below examples. The actual VAT rate used will depend on the PTC (see section 6.0).
Example A:
Business-to-Business (B2B) transaction: Seller is VAT registered in the marketplace country and sells the product to a VAT registered Customer within the EU, we will use the marketplace country VAT rate of the product to derive the VAT exclusive price.
A German VAT-registered Seller that lists an item at €11.90 on Amazon.de will see the following VAT exclusive price for an item subject to VAT at the standard rate:
11.90/ (1 + 0.19) = €10.00
Business-to-Business (B2B) transaction: Seller does not have a VAT registration number in the marketplace country and sells the product to a VAT registered Customer within the EU, we will use Seller’s ‘default country for VAT exclusive price’ VAT rate to derive the VAT exclusive price.
A Polish VAT-registered Seller, whose ‘default country for VAT exclusive price’ is also Poland and who is not VAT registered in Germany, lists an item at €12.30 on Amazon.de. The Seller will see the following VAT exclusive price for an item subject to VAT at the standard rate:
12.30/ (1 + 0.23) = €10.00
Example B:
Business-to-Consumer (B2C) transaction: Seller does not a VAT registration number in the destination country and ships the product to a Customer who is not VAT registered in the EU, then VAT Calculation Services will use the ‘Ship-from’ (please see comments in respect of distance selling) country VAT rate to determine the VAT exclusive price from the display price. VAT rate applied depends on the PTC defined by the Seller in their tax settings;
Following is one of the example outcomes for B2C transaction. For complete list of B2C outcomes. Please refer to section 8.1. Calculation of VAT from the display price to determine the VAT exclusive price.
A German VAT-registered Seller, that lists an item at €11.90 on Amazon.de, ships the product from Germany to a customer in Poland, Seller will see the following VAT exclusive price for an item subject to VAT at the standard rate:
11.90/ (1 + 0.19) = €10.00
Once the VAT exclusive price is determined, based upon the logic detailed above, VAT calculation is performed once more on the VAT exclusive price. This results in an accurate VAT inclusive price which is also the total price charged to the Customer.
Once the VAT exclusive price is determined, the final VAT inclusive selling price is determined by performing a VAT calculation using the methodology described above. This calculation considers three primary components, that is, VAT registration numbers, Vertex rules and logic and accompanying Amazon methodologies, in order to perform the calculation.
Following are some examples to demonstrate the VAT calculation:
Business-to-Consumer (B2C) transaction: A German and Austrian VAT-registered Seller lists an item at €11.90 on Amazon.de, ships the item from Germany and sells the item to a B2C Customer based in Austria (VAT rate = 20%):
VAT exclusive item price calculation: 11.90/ (1 + 0.19) = €10.00
Final VAT inclusive item price calculation: 10.00 * (1 + 0.20) = €12.00
This is because VAT is due in Austria at 20%. The VAT exclusive price stays the same.
Business-to-Business (B2B) transaction: A German and Austrian VAT-registered Seller lists an item at €11.90 on Amazon.de, ships the item from Germany and sells the item to a B2B Customer based in Austria (VAT rate = 0% - intracommunity supply of goods):
VAT exclusive item price calculation: 11.90/ (1 + 0.19) = €10.00
Final VAT inclusive item price calculation: 10.00 * (1 + 0.00) = €10.00
Promotions are fixed-price inclusive, meaning the VAT inclusive promotion value is only determined upon the calculation of the final VAT inclusive selling price (see section 7.2 A). The VAT calculated on the promotion follows the VAT rate associated with the item. Once the VAT inclusive promotion value is determined, we will use the VAT rate associated with the item to derive the VAT exclusive promotion value.
Example A:
Business-to-Consumer (B2C) transaction: A German and Austrian VAT-registered Seller lists an item at €11.90 on Amazon.de and sells the item to a B2C Customer based in Austria (VAT rate = 20%) with a 10% promotion:
VAT exclusive item price calculation: 11.90/ (1 + 0.19) = €10.00 (Display price on de. website)
VAT inclusive item price calculation: 10.00 * (1 + 0.20) = €12.00 (VAT due in Austria)
VAT inclusive item promotion calculation: 12.00 * 0.10 = €1.20
VAT exclusive item promotion calculation: 1.20/ (1 + 0.20) = €1.00
Final VAT inclusive item price calculation: 12.00 – 1.20 = €10.80
Example B:
Business-to-Business (B2B) transaction: A German VAT-registered and Austrian VAT-registered Seller lists an item at €11.90 on Amazon.de and sells the item to a B2B Customer based in Austria (VAT rate = 0% - intracommunity supply of goods) with a 10% promotion:
VAT exclusive item price calculation: 11.90/ (1 + 0.19) = €10.00 (Display price on de. website)
VAT inclusive item price calculation: 10.00 * (1 + 0.00) = €10.00
VAT inclusive item promotion calculation: 10.00 * 0.10 = €1.00
VAT exclusive item promotion calculation: 1.00/ (1 + 0.00) = €1.00
Final VAT inclusive item price calculation: 10.00 – 1.00 = €9.00
Shipping charges are fixed-price inclusive, meaning the price of shipping will not vary based upon the transactional details listed in section 5.0. Only the VAT exclusive shipping charge may vary from one transaction to another and please see shipping taxability option below.
Example A:
Business-to-Consumer (B2C) transaction:
A German and Austrian VAT-registered Seller ships an item from Germany to a B2C Customer in both Germany (19%) and Austria (20%) and the VAT inclusive shipping charge is the same to both countries, that is, €5.00. In both cases, the customer will always pay the full €5.00
Fixed VAT inclusive shipping charge to a German Customer: €5.00
VAT exclusive shipping price calculation: 5.00/ (1 + 0.19) = €4.20
Fixed VAT inclusive shipping charge to an Austrian Customer: €5.00
VAT exclusive shipping price calculation: 5.00/ (1 + 0.20) = €4.17
Business-to-Business (B2B) transaction:
A German and Austrian VAT-registered Seller ships an item from Germany to a B2B Customer in both Germany (19%) and Austria (0% - intracommunity supply of goods) and the VAT inclusive shipping charge is the same to both countries, that is, €5.00. In both cases, the Customer will always pay the full €5.00.
Fixed VAT inclusive shipping charge to a German Customer: €5.00
VAT exclusive shipping price calculation: 5.00/ (1 + 0.19) = €4.20
Fixed VAT inclusive shipping charge to an Austrian Customer: €5.00
VAT exclusive shipping price calculation: 5.00/ (1 + 0.00) = €5.00
Shipping Taxability Options:
By default, each shipping charge is assigned the same product tax code as the corresponding item. Therefore, the same product taxability rules will be applied to shipping charges. A Seller may override the default shipping taxability rule by designating if shipping should always be taxable at the standard VAT rate.
Sellers should consult a tax advisor if they need assistance in configuring this tax setting for their business.
Gift wrap charges are fixed-price inclusive, meaning the price of gift wrap will not vary based upon the transactional details listed in section 5.0. Only the VAT exclusive gift wrap charge may vary from one transaction to another and please see gift wrap taxability option.
Example A:
Business-to-Consumer (B2C) transaction:
A German and Austrian VAT-registered Seller gift wraps an item and ships it from Germany to both a Customer in both Germany (19%) and Austria (20%). The VAT inclusive gift wrap charge is the same to both countries, that is, €3.00. In both cases, the customer will always pay the full 3.00 EUR.
Fixed VAT inclusive gift wrap charge to a German Customer: €3.00
VAT exclusive gift wrap price calculation: 3.00/ (1 + 0.19) = €2.52
Fixed VAT inclusive gift wrap charge to an Austrian Customer: €3.00
VAT exclusive gift wrap price calculation: 3.00/ (1 + 0.20) = €2.50
Business-to- Business (B2B) transaction:
A German and Austrian VAT-registered Seller gift wraps an item and ships it from Germany to both a Customer in both Germany (19%) and Austria (0% - intracommunity supply of goods). The VAT inclusive gift wrap charge is the same to both countries, that is, €3.00. In both cases, the Customer will always pay the full €3.00.
Fixed VAT inclusive gift wrap charge to a German Customer: €3.00
VAT exclusive gift wrap price calculation: 3.00/ (1 + 0.19) = €2.52
Fixed VAT inclusive gift wrap charge to an Austrian Customer: €3.00
VAT exclusive gift wrap price calculation: 3.00/ (1 + 0.0) = €3.00
Gift Wrap Taxability Options:
By default, each gift wrap charge is assigned the same product tax code as the corresponding item. Therefore, the same product taxability rules will be applied to gift wrap charges. A Seller may override the default gift wrap taxability rule by designating if gift wrap should always be taxable at the standard VAT rate.
Sellers should consult a tax advisor if they need assistance in configuring this tax setting for their business.
VAT is pre-calculated at order checkout using the VAT calculation rules and rates in effect on the order checkout date. However, the VAT actually charged to the Customer will be based on the VAT calculation rules (including the VAT registration number status of the Seller and the Customer), rates and actual Ship-from/to location in effect at the time a payment method charge is authorized.
Depending on how a shipment is fulfilled, payment method charge authorization could occur shortly after an order is submitted or immediately prior to product shipment.
Many factors can change between the order checkout date and the payment method charge authorization date. As a result, the pre-calculated VAT amount may differ from the amount actually charged. For example - VAT calculation rules or rates and the actual Ship-from location may change (located under Fulfilment by Amazon Settings) and this could lead to an increase or decrease in the VAT charged and hence an increase or decrease in the price margin.
All refund amounts will be treated as VAT exclusive and VAT calculations on refunds will follow the VAT calculation treatment of the original sales transaction to which it relates.
The Customer refund process will depend on whether the product is shipped using Fulfilment by Amazon (FBA) or is Seller-fulfilled.
Amazon’s VAT Calculation Services will calculate VAT on Customer return and non-customer return related refunds and adjustments, for example a Seller issues a partial refund against the product but did not require the Customer to return it.
Amazon’s VAT Calculation Services will calculate VAT on any refunds issued by the seller via Seller Central. All such refunds are issued at the sole discretion of the seller.
Amazon’s VAT Calculation Services does not support VAT Only Refunds which produce a Credit Note and a new 0% VAT invoice. This mainly applies to B2B cross-border supplies of goods where the customer informs the seller afterwards about his VAT registration number in the other EU Country and claims refund of the VAT charged. If Seller wants to process a VAT Only Refund, then Seller must use the ‘Goodwill’ refund option and produce their own credit note and new VAT invoice.
VAT rates, as well as VAT calculation rules and logic, are supplied by our third-party provider, Vertex, which provides monthly updates that we implement before the end of the calendar month.
Amazon’s VAT Calculation Services will automatically create VAT invoices and credit notes to the Customer in the name and on behalf of the Seller. The Seller however legally remains the issuer of the VAT invoice that has been generated using Amazon’s VAT Calculation Services. VAT calculation and invoice generation will also occur on orders that were placed prior to the activation date but fulfilled after the activation date. Seller must ensure that they no longer produce VAT invoices and credit notes for such orders and all transactions that occur after enrolment within Amazon’s VAT Calculation Services.
Sellers still need to provide credit notes, as required, for transactions that occurred prior to enrolment within VAT Calculation Services but which are only returned/refunded after.
A unique VAT invoice and credit note sequence will be created for each country within which the Seller is VAT registered and which will be printed on the documents. Invoice numbers are created in numerical sequence. In the event a Seller deactivates VAT Calculation services and then re-activates the service the sequence will continue from the last number. There are situations however where a Seller may witness a skip within that sequence. There are two reasons why this may occur:
VAT invoices are available for download in Seller Central:
For Sellers who use Amazon’s VAT Calculation Services , the VAT Calculations report will include VAT calculation information for Sellers. This information can be useful in the preparation of the Seller’s periodic VAT returns. Seller can access this report by navigating to their Seller Central account: Select ‘Tax Document Library’ folder available under the ‘Reports’ tab, click on ‘Amazon VAT Calculation’ tab and select ‘VAT Calculations’ from the ‘Report Type’ dropdown box.
Additional information can also be found in the monthly Amazon VAT Transactions Report that is available in the ‘Reports’ section of Seller Central account.
Sellers should consult a tax advisor if assistance is needed in the compilation and filing of any tax-related returns.
During VAT Calculation Services enrolment, Sellers will be provided with the opportunity to determine when the calculation service will commence. The VAT Calculation settings will be effective from 12:00:00 AM UTC for any activation date Seller chooses.
Please note any amendments made by the Seller to their calculation service commencement date post activation, requires 30 minutes for the changes to take into effect in the system. Sellers are advised to monitor their transactions for the period the change is being made and make corrections as required.
Sellers will be provided with the opportunity to deactivate VAT Calculation Services. Sellers will be solely responsible for calculation, VAT invoicing and reporting from that date onwards.