If you’re an Amazon seller, you’ll want to pay attention to the upcoming changes to Amazon VAT on fees. Starting on the 1st August 2024, Amazon will be responsible for calculating and collecting VAT on fees for all sellers who use its platform. This affects All Sellers, regardless of your VAT Status.
We have already started to pull the VAT changes into our orders. In addition to this, we have added the new Digital Services Fee too, which you will begin to see on your fees listing. This is only a minimal fee, and you won’t see much difference at all.
Who is Affected by Amazon VAT Changes?
Your business faces different impacts based on VAT status:
VAT-registered businesses:
- Can reclaim the 20% VAT through HMRC returns
- Need to update bookkeeping systems
- Must track new invoicing formats
Non-VAT registered businesses (under £90,000 threshold):
- Cannot reclaim the 20% VAT
- Face higher operating costs
- May need to review pricing strategy
This means that you may see changes in the fees you pay and the way they are calculated. Ultimately, this is likely to affect your profit margin. However, below I will also state why there are scenario’s which may mean that, well, nothing may change at all.
If you want to simulate this in real-time, use our free VAT on Fees Calculator.
Changes to VAT on Amazon Fees in August 2024
If you’re an Amazon seller, you’ll want to be aware of the upcoming changes to VAT on Amazon fees in August 2024.
Starting from August 1, 2024, Amazon will be responsible for collecting and remitting VAT on all fees charged to sellers on the UK marketplace. This includes referral fees, FBA fees, and other service fees. As a seller, you won’t need to do anything differently – Amazon will automatically calculate and collect the correct amount of VAT on your behalf.
They will automatically take your VAT on Fees, regardless of your VAT Status. This is going to hit non-vat registered Sellers more, as it’s a fee which cannot be claimed back.
It’s worth noting that these changes only apply to sellers on the UK marketplace. If you sell on other Amazon marketplaces, you’ll still be responsible for calculating and remitting VAT on your own.
Overview of Amazon VAT on Fees
If you are an Amazon seller, it is important to be aware of the VAT on fees that will be implemented in August 2024. This new policy will require sellers to pay VAT on fees charged by Amazon, including referral fees, subscription fees, and FBA fees.
Amazon will automatically collect the VAT on behalf of the sellers and remit it to the Tax Man. This means that sellers will need to ensure that their VAT registration information is up to date and accurate in order to avoid any potential issues.
It is important to note that the VAT on fees will vary depending on the country in which you are registered for VAT. For example, if you are registered for VAT in the UK, the VAT rate on fees will be 20%.
However, if you are registered for VAT in another EU country, the rate may be different. We are UK based, so can only speak on the UK changes.
It is also worth noting that the VAT on fees will be in addition to any other VAT that may be due on the sale of goods. Therefore, it is important for sellers to factor in these additional costs when setting their prices.
Overall, the implementation of VAT on fees by Amazon is a significant change that will impact many sellers. It’s going to hit sellers that aren’t VAT registered the hardest, as even they will have to pay this fee.
Am I effected by the Changes to Amazon VAT on Fees? (Examples)
To an extent, all Sellers will be affected by this change. It will ‘hurt’ Non-Vat Registered Sellers more, as they will have an additional fee which they are unable to claim back.
Let’s do a group example together, using B07H717SXV, a random Babyliss Hair Dryer. As always, we will be using SellerAmp for the pre-sales figures.
Let’s say we have the following figures:
- A Cost Price of £24
- A Sell Price of £44
Exempt From Paying VAT
If you are Exempt from paying VAT, you would be paying £10.31 in Referral and Fulfilment Fees. This sale would leave you with £9.69 profit, 40.37% ROI.
Exempt From VAT, but VAT on Fees Apply
If you were exempt from paying VAT, you would essentially move to this bracket from 1st August 2024. Even if you are exempt, you have to pay VAT on Fees.
So, if you sold the same item at £44, you would still pay the £10.31 in fees, but you would also now pay VAT on these Fees, which takes another £2.06 from the total. This would reduce your Profit to £7.63, or 31.79% ROI.
VAT Registered Prior to 1st August 2024
If you were VAT Registered prior to 1st August 2024, you really don’t have that much to worry about. Your Profit and Return on Investment will remain the same.
Before this VAT on Fees was introduced, you will have been paying the VAT on Fees anyway. From 1st August, Amazon will automatically take this, so you don’t have to do it.
The only affected difference would be your estimated payout from the sale. It will be £2.06 lower than before, but with the VAT on Fees already accounted for.
Impact of VAT Changes on Amazon Sellers
This VAT change is going to affect some sellers, but not all sellers. If you are VAT Registered, you can continue as you were, with the peace of mind that Amazon has started to automatically take some of the VAT for you. Previously, you would have had to include this in your VAT calculations.
However, it does affect non-vat registered sellers. As you will be charged this VAT on Fees regardless of your Registration Status, it can lead to your margins reducing. Just take another look at the example above.
It doesn’t mean that this is the end of the road for Amazon sellers who aren’t registered for VAT though. Far from it. It could be the change that sparks the end of the Price Tanking which is seen on many popular ASINs. As sellers would need to hold their prices stronger, I wonder if we could actually see an increase in prices to offset the extra VAT fee?
Most Sellers are Non Vat Registered when they start selling on Amazon, but many do transition into becoming VAT registered businesses. This means that although you can’t claim back at the moment, it makes the stepping stone a little easier.
We’ve already made this change in your Sales Dashboard, so you’ll see the Vat on Sales figures immediately.