Amazon FBA UK sellers will be impacted by VAT changes that have just been announced by Amazon.

From 1st August 2024, Amazon will change the way it invoices VAT to Amazon FBA UK sellers. As a result, this will increase costs for Amazon sellers resulting in loss of margin.

AT the moment, all Amazon fees (with the exception of Sponsored Ads) are invoiced by Amazon Luxembourg under the reverse charge VAT scheme. As a result, Amazon FBA UK sellers can avoid VAT on Amazon fees by declaring Amazon FBA VAT exemption.

Some Amazon FBA UK sellers can even apply for an Amazon FBA VAT refund if they have previously been incorrectly charged VAT.

Amazon is now changing this process and will invoice sellers from Amazon branches within each country instead eg UK and not Luxembourg as is current practice.

This means that the reverse charge scheme will no longer apply and fees will have VAT applied.

Previously exempt Amazon FBA UK sellers will now see their Amazon fees subject to 20% VAT, this is likely to hit profits by approximately £1-£2 per unit.

For VAT registered Amazon FBA UK sellers, this new change does not really make much of a difference as they can claim the VAT back.

However, non-VAT registered Amazon FBA UK sellers should avoid the temptation to register for VAT early to claim back these fees. It is still more tax efficient for Amazon FBA UK sellers to delay becoming VAT registered until they hit the £90,000 threshold.

Although they will now need to start paying VAT on Amazon fulfilment fees and Amazon referral fees, they will still avoid having to incorporate 20% VAT in their sale price, which would hit profit margins much harder.

Here is the announcement from Amazon regarding Amazon VAT VAT exemption:

Update to Amazon UK and EU agreements and VAT treatment Effective August 1, 2024, Selling on Amazon, Fulfilment by Amazon, and all other services currently supplied by Amazon Services Europe S.à r.l. (ASE) will be supplied by Amazon EU S.à r.l. (AEU).

All agreements, policies, terms and conditions currently referring to ASE, including Amazon Payments agreements, will be updated to AEU.

Additionally, all invoices issued by Amazon will be issued by AEU instead of ASE after August 1, 2024.

If your company is established in the UK, Germany, France, Italy, Spain, Netherlands, Poland, Belgium or Sweden, you will be invoiced by the AEU branch in your country of establishment.

As a result, local VAT rules apply and VAT will be deducted from Amazon fees. In the majority of cases, we expect that you will be able to recover this VAT through your normal VAT return process. We recommend that you contact your tax advisor for more information on recovering VAT as per your country of establishment’s local regulation.

If your company is not established in the countries listed above, you will be invoiced by the AEU head office in Luxembourg, and there will be no change to how VAT is applied on Amazon fees.