How to Sell on Amazon Without a VAT Number: A Comprehensive Guide
Selling on Amazon can be a lucrative venture, but navigating the complexities of VAT (Value Added Tax) can be daunting, especially for new sellers. Many aspiring entrepreneurs are hesitant to start selling because they don’t have a VAT number. The good news is that it is entirely possible to sell on Amazon without being VAT registered, at least initially. This comprehensive guide will walk you through the process, explaining the requirements, limitations, and best practices for selling on Amazon without a VAT ID.
## Understanding VAT and When It Applies
Before diving into selling without a VAT number, it’s crucial to understand what VAT is and when you need to register for it. VAT is a consumption tax levied on the value added to goods and services at each stage of the supply chain. It’s ultimately paid by the end consumer, but businesses are responsible for collecting and remitting it to the government.
In most countries, including those within the European Union (EU) and the United Kingdom (UK), VAT registration becomes mandatory when your taxable turnover exceeds a certain threshold within a 12-month period. These thresholds vary significantly by country. For example, in the UK, the VAT threshold is currently £85,000. In Germany, it’s €22,000 for distance selling to German customers if you’re based outside Germany, but a much higher threshold for domestic German businesses.
**Key takeaway:** You typically don’t need a VAT number to start selling on Amazon if your turnover is below the VAT threshold in the countries where you are selling and storing goods.
## Selling on Amazon Without a VAT Number: Is It Possible?
Yes, it is definitely possible to sell on Amazon without a VAT number, particularly when you are just starting out or if your sales volume is relatively low. However, it is critical to remain vigilant about monitoring your sales and understanding the VAT regulations in each country where you operate. Once you reach the VAT threshold in a specific country, you are legally obligated to register for VAT in that country.
**Important Note:** While you can sell without a VAT number initially, you still need to comply with all other Amazon policies and legal requirements, including income tax obligations, consumer protection laws, and product safety regulations.
## Steps to Sell on Amazon Without a VAT Number
Here’s a detailed breakdown of the steps you need to take to start selling on Amazon without a VAT number:
**1. Set Up Your Amazon Seller Account:**
* **Choose a Selling Plan:** Amazon offers two main selling plans: Individual and Professional. The Individual plan is suitable for sellers who plan to sell fewer than 40 items per month and don’t need access to advanced selling tools. The Professional plan is for sellers who plan to sell more than 40 items per month and require access to features like bulk listings, API integration, and detailed sales reports. If you’re starting small and don’t anticipate high sales volume, the Individual plan is a good option.
* **Provide Required Information:** During the seller account registration process, you’ll need to provide personal or business information, including your name, address, phone number, and bank account details. Amazon will also ask for your tax identification number (TIN), but this doesn’t necessarily mean a VAT number. In many cases, your national tax ID or social security number (for sole proprietorships) will suffice.
* **Carefully Complete the Tax Information Interview:** Amazon requires all sellers to complete a tax information interview to determine their tax obligations. During this interview, you’ll be asked questions about your business structure and tax residency. If you don’t have a VAT number, indicate that you are not VAT registered. Ensure that all the information you provide is accurate and up-to-date.
**2. Determine Where You Will Store Your Inventory:**
* **Fulfillment by Merchant (FBM):** With FBM, you are responsible for storing your own inventory, packaging orders, and shipping them directly to customers. This gives you more control over your inventory but also requires more time and effort. If you are based in a single country and only sell within that country without using Amazon’s warehousing facilities, VAT registration might not be immediately necessary, provided your turnover remains below the threshold.
* **Fulfillment by Amazon (FBA):** FBA allows you to store your inventory in Amazon’s fulfillment centers. Amazon handles the picking, packing, shipping, and customer service for your orders. While FBA can simplify your logistics, it also has VAT implications. If you store your goods in Amazon’s warehouses in different countries, you may be required to register for VAT in those countries, even if your overall turnover is below the threshold. This is because storing goods in a foreign country constitutes a “taxable supply” in that country.
**3. Research and Select Your Products:**
* **Product Research is Key:** Thorough product research is crucial for success on Amazon, regardless of your VAT status. Identify products that are in demand, have low competition, and offer good profit margins. Consider using product research tools like Jungle Scout, Helium 10, or Viral Launch to analyze market trends and identify profitable niches.
* **Consider Product Size and Weight:** When starting out, consider selling smaller, lighter items, as these are typically cheaper to ship and store. This can help you manage your costs and maximize your profits, especially if you’re fulfilling orders yourself.
* **Ensure Product Compliance:** Make sure that the products you sell comply with all applicable safety regulations and labeling requirements in the countries where you are selling. Selling non-compliant products can lead to account suspension and legal liabilities.
**4. List Your Products on Amazon:**
* **Create Compelling Product Listings:** Your product listings are your virtual storefront on Amazon. Create detailed and informative product descriptions that highlight the key features and benefits of your products. Use high-quality images and videos to showcase your products from different angles. Optimize your product titles and descriptions with relevant keywords to improve your search ranking.
* **Set Competitive Prices:** Research the prices of similar products on Amazon and set your prices competitively. Consider factors like your cost of goods, shipping costs, and profit margins when determining your pricing strategy.
* **Monitor Your Inventory:** Keep a close eye on your inventory levels to avoid running out of stock or holding excess inventory. Use Amazon’s inventory management tools to track your sales and forecast demand.
**5. Fulfill Orders and Provide Excellent Customer Service:**
* **Fulfillment Options:** If you’re using FBM, you’ll need to package and ship orders promptly and efficiently. Consider using a reliable shipping carrier and offering tracking information to your customers. If you’re using FBA, Amazon will handle the fulfillment process for you.
* **Provide Excellent Customer Service:** Respond to customer inquiries promptly and professionally. Address any issues or concerns that customers may have and strive to provide a positive shopping experience. Positive customer reviews can significantly boost your sales and improve your seller reputation.
**6. Monitor Your Sales and Turnover:**
* **Track Your Sales Regularly:** It’s essential to track your sales and turnover in each country where you are selling. Use Amazon’s sales reports to monitor your revenue and identify any trends or patterns.
* **Stay Below the VAT Threshold:** Ensure that your turnover remains below the VAT threshold in each country where you are selling. If you are approaching the threshold, consider adjusting your pricing or marketing strategy to slow down your sales growth.
* **Prepare for VAT Registration:** If your sales are consistently increasing and you anticipate exceeding the VAT threshold in the near future, start preparing for VAT registration. Gather the necessary documentation and consult with a tax advisor to understand your VAT obligations.
## Important Considerations and Potential Challenges
* **Distance Selling Regulations:** Be aware of distance selling regulations in the EU and other countries. These regulations govern the sale of goods and services to consumers in other countries. For EU distance selling, if you are based outside the EU and sell to EU consumers, you generally need to register for VAT in an EU country once your sales to that country exceed a certain threshold (which varies by country). The One-Stop Shop (OSS) scheme simplifies VAT obligations for businesses selling goods to consumers across the EU. However, this scheme still requires VAT registration in at least one EU country.
* **Amazon’s Policies:** Familiarize yourself with Amazon’s policies regarding VAT and other tax obligations. Amazon may require you to provide proof of VAT registration if they suspect that you are required to be VAT registered. Failure to comply with Amazon’s policies can result in account suspension.
* **VAT on Digital Products:** If you sell digital products (e.g., ebooks, software) to consumers in the EU, you are generally required to collect and remit VAT, regardless of your turnover. The rules for VAT on digital products can be complex, so it’s important to seek professional advice.
* **VAT and FBA:** Using FBA can significantly complicate your VAT obligations, as mentioned earlier. Storing goods in Amazon’s warehouses in different countries may trigger VAT registration requirements in those countries. Consider the VAT implications carefully before using FBA, especially if you are selling in multiple European countries.
* **Import VAT:** If you are importing goods from outside the EU or the UK, you will be required to pay import VAT at the point of entry. You can typically recover this VAT if you are VAT registered.
* **Brexit Implications:** Brexit has created new VAT complexities for businesses selling in the UK and the EU. If you are based in the EU and sell to UK customers, you may need to register for VAT in the UK, and vice versa. Keep up-to-date with the latest Brexit-related VAT regulations.
## When Should You Register for VAT?
You should register for VAT when any of the following conditions are met:
* **Your Turnover Exceeds the VAT Threshold:** The most common reason to register for VAT is when your taxable turnover exceeds the VAT threshold in a particular country within a 12-month period.
* **You Store Goods in a Foreign Country:** If you use FBA and store your goods in Amazon’s warehouses in different countries, you may be required to register for VAT in those countries, regardless of your turnover.
* **You Are Required to by Law:** In some cases, you may be required to register for VAT even if your turnover is below the threshold. This can happen if you are selling certain types of goods or services, or if you are required to by local laws.
* **You Want to Reclaim Input VAT:** If you incur significant VAT expenses (e.g., on inventory, equipment, or services), you may want to register for VAT even if you are not required to, in order to reclaim the VAT that you have paid.
## Tips for Managing VAT Obligations
* **Keep Accurate Records:** Maintain detailed records of all your sales, purchases, and VAT transactions. This will make it easier to prepare your VAT returns and comply with VAT regulations.
* **Use Accounting Software:** Consider using accounting software that is specifically designed to handle VAT. This can automate many of the tasks involved in VAT compliance and reduce the risk of errors.
* **Consult with a Tax Advisor:** Seek professional advice from a qualified tax advisor who specializes in VAT. A tax advisor can help you understand your VAT obligations, prepare your VAT returns, and navigate the complexities of VAT regulations.
* **Stay Up-to-Date with VAT Regulations:** VAT regulations are constantly evolving, so it’s important to stay up-to-date with the latest changes. Subscribe to VAT newsletters, attend VAT seminars, and follow relevant tax authorities online.
* **Consider the One-Stop Shop (OSS) Scheme (EU):** If you are selling goods to consumers across the EU, the OSS scheme can simplify your VAT obligations. This scheme allows you to register for VAT in one EU country and declare and pay VAT on all your EU sales through a single VAT return.
## Alternatives to VAT Registration (Before Reaching the Threshold)
While VAT registration is often inevitable as your business grows, there are strategies to postpone it or manage it more effectively before you hit the threshold:
* **Careful Inventory Management:** If you’re close to the threshold in a specific country due to FBA storage, consider temporarily reducing your inventory levels in that country to stay below the line. This might mean using a different FBA location or fulfilling orders directly from your home country (FBM).
* **Price Adjustments:** Slightly increasing prices can reduce your sales volume while maintaining profitability, helping you stay below the VAT threshold. This requires careful analysis to avoid losing customers to competitors.
* **Strategic Marketing:** Focus your marketing efforts on countries where you haven’t reached the VAT threshold yet. This can help balance your sales and delay VAT registration in specific high-volume markets.
* **Consider a Limited Company:** Operating as a limited company might offer certain tax advantages, but it doesn’t automatically exempt you from VAT. However, the structure can allow for more sophisticated tax planning with professional advice.
## Conclusion
Selling on Amazon without a VAT number is possible, especially when you’re just starting out. However, it’s crucial to understand the VAT regulations in each country where you’re selling and to monitor your sales closely. As your business grows, you’ll likely need to register for VAT. By following the steps outlined in this guide and seeking professional advice, you can navigate the complexities of VAT and build a successful Amazon business.
Remember, this guide provides general information and should not be considered legal or financial advice. Always consult with a qualified tax advisor to determine your specific VAT obligations.