***DISCLAIMER***
The team at Link My Books are happy to provide users with technical assistance in applying tax rules to their Link My Books setup.  We are not Tax Advisors and so our advice and suggestions on the application of tax rules cannot be construed as tax advice.  We highly recommend that users seek advice from qualified accountants for their tax compliance.

Introduction

VAT or "Value Added Tax" in the EU is complex. Combine that with the fact that Amazon reports are also complex and that you need to use more than one type of report to work out your UK or European VAT and most seller run for the hills.

At Link My Books we have an excellent knowledge and understanding of UK and EU VAT and although we are not tax advisors or accountants we are here to make things as easy and efficient as possible for you and your accountant to get to grips with your VAT liabilities on your Amazon sales throughout Europe.

One vital element in determining the correct tax jurisdiction (e.g which tax authority is due the tax) is the country which SHIPPED the goods. Simply put, if you don't take the Departure Country into account you are calculating the VAT incorrectly, most likely overpaying it and to the wrong authority.

Unlike the majority of competing Amazon bookkeeping integrations, we do take this into account which allows us to accurately determine tax jurisdiction.

Top Tip - If you are using an alternative software, we recommend you verify that they are taking Departure Country into account to ensure that you are filing your taxes correctly.

How does Link My Books work out VAT on sales revenue?

Link My Books separates all sales revenue income into the following 6 groups:

  1. UK Tax Jurisdiction Sales
  2. EU Tax Jurisdiction Sales - Dispatched UK
  3. EU Tax Jurisdiction Sales - Dispatched EU
  4. Zero Rated EC Business Sales
  5. Sales Exported Outside EU - Dispatched UK
  6. Sales Exported Outside EU - Dispatched EU

UK Tax Jurisdiction Sales
Sales which are determined to be taxable in the UK.

This could be:

  • Sales delivered to a customer in the UK or;
  • Sales delivered to a customer in an EU country where you do not currently hold a VAT registration and which have been dispatched from the UK.

👉If you only hold a UK VAT registration then all of your EU sales, regardless of if they delivered to the UK or another EU country, will be taxable in the UK and will fall into this group. The only exception to that would be Zero Rated EC Business Sales, see below for more info.

EU Tax Jurisdiction Sales - Dispatched UK
Sales which are determined to be taxable in another EU country and which have been dispatched from the UK.

This could be:

  • Sales delivered to a customer in another EU country where you are VAT registered which have been dispatched from the UK.

EU Tax Jurisdiction Sales - Dispatched EU
Sales which are determined to be taxable in another EU country and which have been dispatched from the another EU country.

This could be:

  • Sales delivered to a customer in another EU country where you are VAT registered which have been dispatched from an EU country.
  • Sales delivered to a customer in another EU country where you are not VAT registered which have been dispatched from an EU country where you are VAT registered.

Zero Rated EC Business Sales
Intra EU B2B (business to business) supply of goods where the customer is a VAT registered business in another EC State.

This could be:

  • Sales delivered to business customers who are VAT registered in other EC States, which have been dispatched from the UK.

👉If you're using the Amazon VAT Calculation Service, Amazon automaticity zero rates these sales for VAT so the business customer does not pay any VAT. Hence it is important that we separate these out so that you can apply the correct tax rate to them and ensure that you do not pay any VAT to HMRC that has not been passed to you by these customers.

Sales Exported Outside EU - Dispatched UK
Sales which have been exported outside the EU and which have been dispatched from the UK.

This could be:

  • Sales delivered to customers outside of the EU which have been dispatched from the UK.

👉If you're using the Amazon VAT Calculation Service, Amazon also automaticity zero rates these sales for VAT too.

Sales Exported Outside EU - Dispatched EU
Sales which have been exported outside the EU and which have been dispatched from the another EU country.

This could be:

  • Sales delivered to customers outside of the EU which have been dispatched from the another EU country.

👉If you're using the Amazon VAT Calculation Service, Amazon also automaticity zero rates these sales for VAT too.

Where does Link My Books get this information from?

Link My Books uses the VAT Transaction Report from Amazon to assign ever sale and refund transaction to a tax jurisdiction group, as outlined above.

This report is available on the 5th of each month from Amazon and contains all the data we need to correctly group all revenue transactions.

The report contains detailed information such as the tax jurisdiction Amazon has assigned as well as information about if the transaction was exported outside the EU or if it was a zero rated business sale.

Since we rely on this report being accurate and Amazon having calculated the tax justification correctly it is very important that you ensure that Amazon has all of your EU VAT numbers so that they have all the information they need to correctly assign tax jurisdictions. You can read more about this in our article on why entering your EU VAT numbers into seller central is important.

What if I am not enrolled in the Amazon VAT Calculation Service?

If you are not enrolled in the Amazon VAT Calculation Service then don't worry, we have a backup for that!

Your VAT Transaction Reports will not contain any tax jurisdiction information nor will they contain information about if the transaction was exported outside the EU.

However we can detect this and when we do so we fall back to our own programatic method of allocating tax jurisdictions to your sales revenue transactions.

This involves using the dispatch country and arrival country information, which is still shown in the report, to assign tax jurisdictions instead. We can also then see if you sales were exported outside of the EU and if they were zero rated EC business sales.

So overall you should not notice any difference and can be confident that your sales revenue will still be correctly grouped.

How do I know which tax rates to select?

Now you know how we group sales revenue into taxable jurisdictions but how do you know which tax rates to apply to each group?

When you connect a European Amazon Seller Account to Link My Books the first thing we do is take you through a guided setup wizard. The wizard asks you some basic questions and then helps to suggest possible tax rates that may be suitable for your business. You should always check these with your accountant.

As you can see in the screenshot below, the first 6 categories to select tax rates for are the tax jurisdiction groups we have discussed:

To learn more about tax rates and which ones to choose if you are a UK VAT registered business then please see our article on What should be included in my UK VAT return?


If you have any questions about this article then please reach out to us via the blue chat icon at the bottom right of this page or speak with your accountant for further clarification.

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