What is VAT?

if you are thinking about VAT for Amazon Sellers then you may also be wondering "what is VAT" VAT stands for "Value Added Tax" and is a type of sales tax that is applied in both the UK and also in the EU.

Since VAT is a sales tax, this means that it is a tax on the actual price that you sell a product for as opposed to the profit that you actually make on it. This means that it is charged regardless of how much profit you actually make on the sale or whether you even make a profit at all.

This means that if you are an Amazon Seller then you will need to charge VAT to your customers based on the price that sold the product to the customer and not on the amount that Amazon paid you(since Amazon will deduct their fees before paying your disbursement).

This often means that when looking at Amazon Sellers we sometimes find our clients are paying almost as much in VAT when selling a product than they make when compared to their profit margin!

When do I need to register for VAT ? This answer actually depends on whether you are UK based business OR an overseas-based business

VAT for overseas Amazon FBA Sellers (non-UK, non-EU):

if you are an overseas business and you aren't based in the UE, then you will need to register for VAT as soon as you plan to start making sales in the UK. It does not matter what your turnover is, you must register for VAT immediately if you are planning on selling on amazon in the UK.

IMPORTANT: if you are an overseas individual and you own a UK Limited company that sells on Amazon then the UK limited company is treated as a UK business and does not need to register for VAT until it reaches the UK VAT threshold.

happy learning!