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For international businesses operating in Spain and utilizing the Amazon Forwarded by Amazon (FbA) arrangement, navigating VAT compliance can be a complex endeavor. With cross-border transactions come various intricate VAT issues that require a solid understanding of the VAT regulations in different countries. In this article, we will delve into the Amazon VAT Payments Report and its significance for businesses selling on Amazon in Europe.
The Amazon VAT Transactions Report encompasses over thirty fields or columns of data, each of which could have tax implications. Each transaction is represented in a separate row.
However, for tax advisors or professionals handling VAT compliance, the following fields are of utmost relevance:
Date / Item / Type / Cost (*) / Country of depart / Country of arrival / Price excl. VAT (*) / VAT (*) / Total price
The fields marked with an asterisk (*) indicate that they will be left blank unless the FbA seller has enrolled and activated the Amazon VAT Calculation Services.
The “date” field corresponds to what Amazon refers to as TRANSACTION_COMPLETE_DATE. The report also includes the dates of item shipment from the departure country and arrival in the destination country.
However, these dates are irrelevant for VAT purposes since VAT is chargeable and due when transactions are completed, specifically when the goods are supplied (according to Article 63 of the EU VAT Directive).
The “item” field is self-explanatory, representing the item being sold.
The “type of transactions” field corresponds to the TRANSACTION_TYPE field in the Amazon VAT Transactions Report.
This field can have the following values: sale, return, refund, Fc transfer, or inbound. The first three values are straightforward. “Fc transfer” refers to the movement of goods between Amazon Fulfillment Centers. We will explain later why this information is necessary.
Finally, “inbound” refers to the delivery of inventory from the seller’s premises to an Amazon fulfilment centre.
The “cost” field, known as COST_PRICE_OF_ITEMS in the Amazon VAT Transactions Report, represents the cost of the items sold.
Surprisingly, many Amazon sellers mistakenly believe this information is irrelevant to VAT compliance. However, this could not be further from the truth. If the seller has allowed inventory to be stored in other EU countries in the Cross Border Fulfillment Settings of the Amazon configuration page, this information is needed to report “EU transfers.”
These transfers refer to the movement of inventory from one Amazon warehouse to another fulfilment centre located in a different country.
These inventory movements are taxable transactions that must be reported at a cost in the destination country under the “reverse charge mechanism.”
However, a transfer occurs only when goods are moved to another warehouse before being sold to customers, meaning they are stored awaiting future sales.
On the other hand, if goods are shipped to a fulfilment centre in another country for subsequent delivery to the buyer after they have been sold, the transaction is considered a distance sale rather than a transfer.
In the latter case, a distance sale is deemed to have occurred between the country from which the goods were initially shipped and the country where the buyer is located. If the goods pass through other fulfilment centres to the buyer, these intermediary warehouses are disregarded.
When an Amazon seller engages in EU transfers, they must register and submit tax returns in all the countries where their inventory is stored.
Similarly, non-EU online sellers should appoint a tax representative in these countries, at least in Spain.
The following diagram illustrates the process of an EU transfer:
The “country of depart” and “country of arrival” fields are crucial as they provide essential information for reporting various scenarios related to cross-border transactions (ES/ES, UE/ES, and ES/UE).
In the case of Spain, the following combinations are possible (similar situations occur in other countries):
ES/ES: This indicates that the goods are departing from and arriving in Spain, representing a domestic sale that does not pose any issues.
ES/UE: This represents an outbound distance sale. Such transactions are subject to taxation in Spain until sales in other EU countries exceed the threshold specified in each respective country.
Monitoring this threshold is essential to ensure that the appropriate VAT is charged based on the buyer’s country.
Note that a taxpayer can choose to charge the VAT of the destination countries from the beginning. This may be advisable when the tax rate in the destination country is lower than the Spanish VAT rate.
However, if the buyer is a business (B2B transaction) rather than an end consumer (B2C transaction), the transaction would not be classified as a distance sale but as an intra-Community supply of goods, taxable in the country of destination. Please refer to our page on VAT obligations when selling online for further details.
UE/ES: This signifies an inbound distance sale. Such transactions are subject to taxation in Spain if the sales in Spain in the previous year exceeded €35,000 or if this threshold is reached during any calendar year.
The last three fields are the net price (VAT excluded), the VAT charged to the buyer, and the total price. It is important to note that if the seller still needs to enrol in and activate the Amazon VAT Calculation Services, this information may not be available.
In such cases, only the total price will be provided. Generally, it is straightforward to calculate the VAT from the total price.
However, in most countries, including Spain, multiple tax rates exist. For example, in Spain, there is the standard VAT rate of 21%, as well as reduced rates (10% for certain items like pre-made food, animals, seeds, water, and medical devices) or even 4% for items like bread, eggs, milk, wheat, fruits and vegetables, medicines, books, and magazines.
To ensure accuracy, verifying the applicable tax rate for each item sold is important. This may be easy when the report contains only a few transactions or a limited number of items.
However, when dealing with thousands of transactions and hundreds of items, it becomes a challenging task. Therefore, enrolling in and activating the Amazon VAT Calculation Services is highly recommended.
Understanding the Amazon VAT Payments Report is crucial for international businesses operating in Spain and utilizing the Amazon FbA arrangement.
By harnessing the power of this report and complying with VAT regulations, businesses can ensure accurate VAT reporting and maintain compliance.
At Employing In Spain, we specialize in providing expert guidance and assistance with labor and employment matters, including VAT compliance.
Contact us today for personalized support tailored to your specific needs.
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