How to pay 0% VAT on Amazon orders within the European Union. (EU Reverse Charge Mechanism)
For legal reasons this post does not constitute tax advice.
One pro-business benefit of the European Union is the ability for cross-border transactions to be taxed at 0% at the point of purchase and then correctly taxed later in the accounting process. This is known as the EU Reverse Charge Mechanism.
This is an important bureaucratic right you should exercise because it can be a real pain to request a VAT refund any particular EU country. So it is better to not pay the VAT to the ‘wrong' country in the first place and have your products sold at 0%.
First of all you need an Amazon Business account. You can sign up to any of the locales near you. UK, Germany, France, Italy, Spain. (Amazon just extended a 50% discount on your first order if you sign up using these links. See also this article I wrote which explains the promotion.)
Note that there is a checking process in the sign up which can take a day or two, but you are allowed to register as a private individual sole trader or a limited liability company. You do not need a VAT number to sign up but in order to get 0% VAT invoices you must have it entered and verified by the time you order. Verification is instant as it runs the same algorithm as the one on the European Commission's website.
How it works
0% VAT invoices are issued under the EU Reverse Charge Mechanism which means you can buy online from any EU country and have them delivered to you. You then add VAT back in the country of your business registration during your normal accounting procedures, which for most ends up in a deduction in your VAT bill.
A important things to note:
- You need to provide your VAT number at the time of sale
- Sales must be done on a business-to-business basis
- The country that issues your VAT number AND the country of delivery must be different to the Amazon website you use. (The VAT and delivery countries may be the same.)
Examples
Even though my examples below use Amazon Spain, the same principle applies to any of the Amazon EU sites.
Buying from Amazon Spain using an Estonian VAT number and delivery to Portugal
This is a common usage for those who wish to use Estonian e-Residency but the same applies to anyone with an EU business. Since you are buying from Spain and neither the VAT number nor the delivery address is Spanish, then your purchase is invoiced using 0% VAT and you apply EU Reverse Charge Mechanism.
Buying from Amazon Spain using a Spanish VAT number and delivery to Portugal
Even though your delivery address is not Spanish, your VAT number is. Therefore your order will have 21% VAT paid to the Spanish authorities.
Buying from Amazon Spain using an Estonian VAT number and delivery to Spain
Like above, because at least one component of your VAT or delivery address is Spanish then you will be billed the local VAT rate rather 0%.
I already have an Amazon in my country. Can I still use EU Reverse Charge Mechanism?
Yes! The issue you may have if you are exercising your right to register your company in another EU country but work in another, is one of your VAT number or delivery address will probably trigger the ‘wrong' VAT rate.
Therefore you should use a different Amazon country's website to make the purchase. You will need to weigh up any delivery costs with any other savings you can make.
Bottom Line
It is an EU right of all citizens and businesses to purchase anything from any other part of the Union. There are set processes and protections in place to facilitate this, and the Reverse Charge Mechanism should be seen to cut out bureaucratic steps which is well within the spirit of how the European Union aims to function.
Do Amazon send any correspondence to the VAT registered company of your VAT number or to the tax authorities of the country (i.e. to your Estonian business or the Estonian government directly) or is all reporting of the VAT owed completely left to the Business account holder?
The VAT reporting is done by the seller, buyer and also Amazon where the supplier isn’t Amazon. Amazon provides a VAT invoice compliant with the EU Reverse Charge mechanism requirements (i.e. has seller and buyer VAT numbers) for your records, but you also need to report to your own country how much you have bought/sold in cross-border EU services and goods.
Thanks for your help – you’re genuinely one of the few places who have information on the process for someone who isn’t already informed (so please excuse my ignorance). Just to be clear, if the seller is Amazon and I am the buyer (and I’m in a different country to the Amazon I purchase from, as you note), Amazon’s responsibility is to provide me with the VAT receipt and the rest of the responsibility is on me to report, is that correct? Or is there other reporting going directly from Amazon to my local tax authority outside of what has been provided to me?
Hi David, apologies, I did not realise you had made a follow up comment! Correct Amazon has the responsibility to provide you a VAT receipt/invoice for the sale. It is an obligation that any business selling under the EU Reverse Charge Mechanism has.
Hi, I lived in the UK and opened an Amazon account there many years ago. Then I moved to Portugal and opened my own business. I kept buying on Amazon UK, Spain and Germany but I always have to pay VAT when ordering for I see nowhere during the purchase process where I can enter my VAT number (I’m registered with VIES). Can you help with where/ when I the VAT number provided?
Thank you in advance.
Do you specifically have an “Amazon Business” account, or is it a personal one? You must use “Amazon Business”
Hi, thank you for writing this post and I have the following question if you could answer it:
Recently I bought an item similar to “Buying from Amazon ‘Business’ Spain using an Estonian VAT number and delivery to Spain” then I used ship forwarder from “Spain” to “Estonia”. In my case Amazon Spain didn’t offer shipping directly to VAT residence, so “Estonia”.
So with this I paid »21% VAT« to the »Spanish« authorities and the item location is in the country that issued my VAT.
Do you have any information and experience on how to reclaim VAT from “Spain”?
There is a topic of “VAT refunds” on europa.eu (https://europa.eu/youreurope/business/taxation/vat/vat-refunds/index_en.htm) but I haven’t used this mechanism yet.
I appreciate your taking the time.
The issue is you delivered to Spain. Part of the Reverse Charge Mechanism is that the product is delivered to a foreign EU country to qualify.
I currently do not have written information on reclaiming VAT from Spain, sorry.
Thanks for the reply!
Yes I understand that Reverse Charge Mechanism in my case does not apply. I was just wondering if you have any experience with VAT refunds from other EU members – in the circumstances described above.
Unfortunately I don’t have experience with that!
Hello
We have a business account based on our GMBH company in Germany
We order regularly from Amazon for our office usage (not for resale)
Since Amazon gives us a 30days payment allowance, sometimes we order personal items via this account but pay from private bank account. Obviously we do not declare these purchases in company books.
Recently we have had some private orders which have no Ust. (VAT) On them
Seemingly coming from countries outside Germany but within EC;
We are a bit confused how to act now Since as a private person we feel we are supposed to pay the VAT.
Could you please be kind enough to advise if there is anything wrongdoing from us
Thank you in advance
Likelihood is you will need to classify those private purchases as disallowed expenses and reimburse the company back. How you actually pay the VAT on top I do not know.
I have addresses in UK and Spain and am VAT registered in the UK although I do not trade.
I have accounts on Amazon.co.uk and Amazon.es. Nether are business accounts and I am not VAT registered in Spain.
My first question is in which country should I create a business account?
My second question is the if I order goods from the Amazon.es site for delivery to a UK address is IVA chargeable?
And finally, if IVA is NOT charged, do I have to account for the transaction and any VAT to UK authorities? If so, how?
A lot of questions to answer there… In your specific situation you’re better getting an accountant both in Spain and the UK. Basically with Brexit, IVA is charged to any deliveries inside the EU, and likely for deliveries outside (even though the rules state IVA shouldn’t be charged). If you qualify then you can get a refund from the relevant authorities.
Hi,
Your website is extremely informative. Thank you so much. I do have a questions. We have a Spain VAT and our delivery address is in Spain. If I purchase from Amazon Germany to deliver in Spain and the item actually is fulfilled in Spain by Amazon, will I get charged VAT or will it be 0%?
Update –
How about using a Portugal VAT purchasing from Amazon Spain and delivery to Portugal. Will this trigger the VAT to be billable?