VAT Explained Amazon FBA - How to Calculate VAT - Amazon FBA UK 2019

In this video I show how VAT applies to all Amazon FBA fees including FBA Fulfilment/Referral Fees and your Pay Per Click (PPC) Sponsored Ads. I also show how to calculate VAT.
The easiest way to understand VAT is that there are two types - Input VAT (Purchases) and Output VAT (Sales).
Input Vat - This is paid on all purchase product and services to VAT registered businesses. It is also paid and on imports from outside of the EU (i.e. China). Input VAT is reclaimable if you are VAT registered, otherwise it is not reclaimable.
Output Vat - This is charged on all of your Amazon product sales once you become VAT registered, it does not apply if you are not registered for VAT.
How to Calculate VAT:
• Calculate 20% VAT by multiplying by 0.2 (or multiply by 1.2 for VAT inc. Total):
£10 x 0.2 = £2.00 VAT£10 x 1.2 = £12.00 inc. VAT
• Reverse calculate 20% VAT by dividing by 6 (minus from total for VAT exc. Total):
£12 / 6 = £2.00 VAT£12.00 - £2.00 = £10.00 exc. VAT
General Vat Notes:
• Reclaiming VAT - You don't really claim VAT back (unless you have previously overpaid VAT to the HMRC), instead your Input VAT is deducted from your Ouput VAT and you pay the difference to HMRC.
• The standard UK VAT rate is 20%, these are certain products that carry a lower rate e.g. Baby Clothes are 5% and Cycle Helmets 0%.
• If your supplier is offering DDP (Delivery Duty Paid) shipping method you will need to ask them to provide an invoice in order to reclaim VAT.
• If you use a freight forwarder they be able to supply the relevant VAT invoice.
Non-VAT Registered vs VAT Registered Profit Margin Comparison
• Non-VAT Registered Profit (Your Price £20.00 - Total Unit Cost £14.04) = £5.96 Per Unit
• VAT Registered Profit (Your Price £16.67 - Total Unit Cost £14.04 + Total Input VAT £2.34) = £4.97 Per Unit
• So despite charging £3.33 less for the product when VAT registered, in this example you only lose £0.99 of profit as you are able to reclaim £2.34 for Input VAT.
When to become VAT registered
• If you are a UK resident when turnover reachers £85,000 per annum
• If you non UK resident as soon as you start selling in the UK
• If you are using PAN-European you must become VAT registered in every country your stock is held
• You do not need to be VAT registered if using EFN and under the respective countries VAT threshold
If you have any questions about Amazon VAT or FBA Fees drop it in the comments below or email me (my email address is at the end of the video)! !
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[@FBA-Elite]

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[@kaveeshnair211]

I don’t usually comment on videos, but this is literally the most informative video on VAT! Thanks mate. I’m a subscriber now. :)

[@TheRemikarlos]

Wow, impressive, I had no idea Amazon services did not include VAT. Tomorrow first thing, I'll re-do my products calculations with VAT this time. Thanks Darren!

[@meljel894]

Wonderfully clear. If everything else turns sour, you can always go into teaching LOL. I've never liked calculations, tax etc... but you make it so easy to understand. I am a Brit based in Italy (and want to sell in UK )so would have to be VAT registered. I've had businesses in Italy but find the financials so confusing and tax is much higher here too. Thanks Darren for the knowledge and the sharing of that.

[@TamerAzizz]

Great Insight Darren. You kept it thoroughly detailed yet very simply explained. Well noted! Thank you

[@mightyfineproducts548]

WOW WOW WOW!!! Thanks so much for this data Darren, I was in 2 minds as to whether I should register my Amazon Ltd. company for VAT. Needless to say I'm now in 1 mind now 😁😁😁

[@lidijaspoljaric7489]

Thank you for all the details, great video!

[@SuperNaturalRemedy]

Great video! Thanks for this. Your explanation of VAT was very helpful.

[@raerae6235]

This video was so helpful. Thank you so much for making this :)

[@janicecalvert8852]

great vid, clear and concise - subbed

[@ukevo]

Oh my word, a week ago I thought I had everything planned and was going to order my first batch of stock but I've found your videos and realised what I knew was the tip of the iceberg. I really want to get an Amazon FBA business going but feel very unprepared now

[@ukevo]

Not a criticism, by the way...I'm very glad I've found these videos.

[@leedickenson8038]

How are you finding it 2 years down the line?

[@leedickenson8038]

Great video Darren, really helpful!

[@dangraef7520]

Great video man! I have to admit, I didn't realise fulfillment and referral fees were excl. VAT until today 😬

[@tismeDenis]

Thanks for the info Darren, all important as usual ;-)

[@FBA-Elite]

Thanks Denis.

[@JansonSmith]

Good video! Amazon are very misleading about VAT. Even if you are vat registered, The 15% referral fee is charged on your gross sales, which means it's actually 18%! And PPC when you set your budget as you say doesn't include vat!

[@FBA-Elite]

Thanks Janson, charging VAT on the gross sales is very sneaky - I guess it's just another dark side of FBA to be aware of!

[@bocio7965]

Very well explained! Thanks a lot for the information! So helpful! :)

[@PogbaMUFC6]

Hi mate, what will I need to do in terms of VAT/tax if I am a new seller on Amazon? Will I have to pay income tax on my earnings?

[@ProklisiTV]

Thanks a lot for this video!

[@m.allmark]

Awesome video again man! Just hoping when I start PPC I don't get a ton of clicks and not many sales. Say if it was £1 per click and I was making £5 profit per item if I get 5 clicks and no sales then i've lost all my profit on that one sale. This would indicate why its so important to have a good listing I guess :)

[@seanmcgovern6907]

Hi Darren - Really helpful video, Thank you. Still struggling with the amazon payout and its breakdown. what VAT I owe on it and what I can claim back (OR is that already accounted for in my payout)?? Is there software or something that can take the uncertainty out of it??

[@123machy]

love this.

[@FastTrackFBA]

Nice video! It really emphasize how VAT works. This will help me for my videos!

[@sarmadmasood438]

Hey Darren, Great Video! One question how are you supposed to import from outside EU without being VAT registered? Don't you need EORI number?

[@mikes6403]

Hi Darren . What do you think about flat rate VAT for Amazon sellers in general and new sellers in particular ? Thanks in advance

[@HankScorpio468]

Hey man thanks for the great video. In terms of vat on fba, does amazon automatically remit tax to hmrc or do you need vat services on Amazon to have that happen? Help on this would be greatly appreciated

[@ExpertGuidancebyMahimaLaroyia]

Hi Can you please help me with how to calculate your EC acquisition tax from your VAT transaction report. Thanks

[@shamayel1]

Great Video !! On your last slide "When to register for VAT", I'd say we also need to register for VAT if we're under the threshold of £85,000 pa, but need to import products from abroad e.g. China. Is that correct?

[@rgamble69]

Where can you find the list of service charges in Seller central? That you show at 3:30 I can't find any reports like that

[@textcentric]

Darren, love your work! This is great. Simply the best and easiest to understand explanation of how to do the VAT maths. I wish I had seen this BEFORE I ordered my product! Do you have anything on getting the data from Amazon and filing your VAT return? Thanks mate!

[@FBA-Elite]

Thanks Charles, I use Link My Books to process the data from Amazon into Xero.

[@peace456me]

Fantastic video. Thanks so much. Please with the VAT Amazon charge on my sales, where can I find the total VAT for every month to be able to know how much I have to return to the government? Or is it Amazon that will return my sales collected VAT on my behalf? Thank you.

[@englishwithme9922]

if am vat registed and i claim back my money, do i have to put vat on my goods am selling as a output taxs am afraid customer wont buy my item as it would be more expensive?

[@craigcrowhurst9877]

Nicely explained

[@vladimirturcan755]

Does Amazon pays any VAT to the STATE from that amount of 15% of referral fee ? I mean that fee of 15% includes a part a the VAT from the last selling price of 20£?

[@fitdivinas7091]

Great video ! How about if I have LTD based in Uk but I am not a resident of UK (l live in France) and I am selling in Uk Amazon. Should I register for Vat in Uk as well ? thxxx so much

[@robertwielgusiak7390]

If you are VAT registered is it not easier to count your costs without VAT? In your second example its like adding VAT to your costs and then subtracting it (reclaiming) again.

[@justnaz8444]

The tax you pay on ppc, can you reclaim that back as well?

[@rajivshah5864]

if you are vat registered, amazon does not charge VAT on the referral or fulfillment fees. how do we account for this VAT element in our books?

[@hitagiNcode]

Guys I got VAT registered today. But I have been selling for 3 months from outsıde of EU. I'm in a Non-EU country so do i need to pay VAT for my old sales ? If I'm going to ship items from Non-Eu conutry do I have to charge for VAT ? I understand if i sell from FBA i have to charge VAT.

[@faisalejaz3326]

Dear, just explain one thing that the vat tax would be on total sales value or fba and refferel fees, or total profit made by sales on amazon? How can i calculate my vat tax as a across border seller. Thanks

[@DoseofJoe]

Thanks Darren I want to ask you about your ideal price which you should put for the product on amazon because I can see from your example it’s *5 from the supplier until cost and from my experience it’s very hard did it work with you? Thanks again

[@FBA-Elite]

I would aim for £20 to £30, the lower priced products become very difficult once you become VAT registered.

[@CyrusLemonius]

Really appreciate the clarity in this explainer. Simple to understand. One question, I just joined amazon UK sellers, I do not live in the UK but set up a UK Ltd company which my sellers account runs under. Do I need to register for VAT in this instance? Or only once I reach 85k in a year period ? Thanks

[@FBA-Elite]

Thanks for watching Chris, my understanding is that if you selling in the UK (and hold stock in the UK) but don't live in the UK then you need to be VAT registered from day 1.

[@tassview7850]

Hi Darren, I am new in this business. I will be more profitable than VAT registered if I am not registered with VAT (depending on £85000) according to your video. What do you suggest to me on VAT as a new seller? Do I wait until to hit £85000 and gain benefit? Please can you comment on my situation, thanks

[@ChristosFellas]

Hi Darren! Superb video.... going to use this whenever I get VAT related questions on my facebook group. Quick question on behalf of myself and apologies if it sounds silly. In regards to the thereshold of 85k, is that total sales or is it total payments from amazon? Thanks in advance. Christos

[@FBA-Elite]

Hi Christos, thanks for the feedback and support! My understanding is that the £85k refers to the sales and not disbursements, even though you don't receive all of the money from Amazon it is your sale so counts towards the total.

[@eezy251able]

I think depending on what you're selling, one can just open an individual account and run google ads to your Amazon page and then ship the Items off yourself.

[@volkanacil8760]

Hi Darren. I would like to know whether the Output VAT is getting paid by Amazon or by us. In the video you have shared with us there is a VAT of £3.33. So I would assume Amazon pays to HMRC and as VAT registered business we don't deal with this but we just claim the Input VAT for Landed Costs and Amazon Fees. Can you please confirm this for me? Many thanks.

[@davyjones1221]

Muhasebecinin vat return yapmasi gerekiyor volkan

[@KB-cc6dh]

HI Darren your video doesnt make sense because having a VAT report form Amazon shows a 0% vat charge and a reverse VAT system applies. Any thought? Date Description Price (VAT Exclusive) VAT% VAT Total 01/11/2019 Seller Fees GBP 25.00 0.00% GBP 0.00 GBP 25.00

[@joshuac4481]

Thanks Darren. Would like to ask if I am ordering my goods from China which most likely will not be VAT registrable. Can I still reclaim back my VAT?

[@denisyanchoglov5132]

Hi mate, look, I have a question, when and how exactly do I need to pay VAT if I get my items from Alibaba (China) ? My products will arrive next week. I tracked UPS and it's already arrived to the UK but I have not received any VAT or Custom Duties requirements to pay for. I am not VAT registered (just started)

[@Random.Thoughts21]

Must watch if you want to understand VAT of UK.

[@youtubewatcher8254]

Hello, I noticed you said that if you’re VAT registered you can offset/ not get charged the VAT added onto the amazon referral fee and the fulfilment fee. How do I do this? I’m VAT registered. Is it something you do via settings or do you have to input your VAT number into amazon?

[@FBA-Elite]

Once you have added your VAT details in Seller Central they should start zero rating all of your invoices (as they are invoiced from Luxembourg under the reverse charge scheme), your Amazon Ads invoices will continue to show VAT (which you reclaim as part of your VAT return) as they are invoiced from your local country.

[@taimoor722]

foe ec0 fridently products how much vat

[@nanysdk2011]

Thanks for the value, great job. But how could I register for VAT in the UK, to sell on Amazon UK, when my business is operating in Sweden, thanks?

[@FBA-Elite]

The official gov website should have everything you'll need: www.gov.uk/guidance/vat-what-to-do-if-youre-an-overseas-business-selling-goods-in-the-uk

[@civilservant4843]

Did you forget to add storage fees or is that not included in the Vat

[@artbridder]

07:52 - You are missing storage fee costs, UPS fee cost to deliver goods to Amazon warehouse, potential labelling cost + return costs

[@selamikaratas]

What about if we are selling (exporting) to USA from UK. I know VAT rate is 0, when you sell outside of EU. But can we reclaim back to VAT we paid the import goods which we export to non EU country if we are VAT registered?

[@FBA-Elite]

I'm not 100% sure on that as it isn't something i've tried. If you do find out please let me know :-)

[@massiveaction2371]

im not VAT registered as under £85,000 sales. still have to pay VAT on my Amazon fees but hate it the way they hide it from newbies on the display fees as it catches many people out and your profit margin is less than you thought. If i become VAT registered i no longer pay the hidden Amazon VAT fee and Amazon take it off my invoice?

[@FBA-Elite]

I completely agree, they should be a lot more transparent about the VAT they charge - instead of just burying on the report pages. My understanding is the same as yours is that when you become VAT registered Amazon won't charge you the VAT on your fees - i'll make a video when I get to that stage later this year to confirm :-)

[@mohammedkuhail6315]

Great Video ! Assuming you are VAT registered. When you calculate you profit margin % which is profit margin/ sale price, Is the sale price including VAT or without VAT ? In your profit margin formula , you have already deducted VAT. And the same question for ROI which is calculated by profit margin/ landed cost . Is the landed cost including VAT or without VAT ?

[@FBA-Elite]

I have a free profit margin calculator for VAT and non-VAT here: www.fbaelite.com/resources/template-profit-calculator-with-and-without-vat.20/

[@adventurousgirl1]

Can you/should you registered for Vat from the beginning? I though this is mandatory in the Uk if you wanna open your amazon FBA account and register as sole proprietor

[@FBA-Elite]

If you live in the UK you can wait until you reach the VAT threshold. If you are outside the UK and have stock in Uk fulfilment centres then you need to register day 1.

[@Roleplay_animal1life]

Wow, there's barely anything left out of that £20:D I am making tiles and was thinking listing them on amazon, but judging from just initial glimpse and keeping in mind that object is not light, not so small, with added taxes, I would probably end up owning money to Amazon:(

[@roulezcool5367]

dont forget storage fees. Then 20% corporation tax on profits plus 20% tax when you pay yourself.

[@FBA-Elite]

Here is the profit breakdown as my head was in the way of the presentation :-) • Non-VAT Registered Profit (Your Price £20.00 - Total Unit Cost £14.04) = £5.96 Per Unit • VAT Registered Profit (Your Price £16.67 - Total Unit Cost £14.04 + Total Input VAT £2.34) = £4.97

[@amarjitkapur6618]

If you are VAT registered then Amazon fees - Fulfilment and Variable are not charging VAT.

[@Mrcaen]

Hi Daren, minute 5.20 if we want to know total VAT for £20 : using Method 1) £20 X 0.2 = £4 ---------- HOWEVER using method 3) £20 / 6 = £3.33. which one is correct ??

[@JZ-cx6mi]

Daren, unless it's required what is the point of registering for VAT then? According to your video, you always end up pay more VAT if registered [not to mention the headache of VAT compliance]

[@mileady777]

7:34 minute of the video: most of Amazon invoices use different VAT numbers, in Luxembourg, Spain, France etc, therefore there is 0 VAT Rate used as a reverse charge. We are not allowed to manually calculate VAT on these costs to claim them back...* reverse rule applies therefore we need to calculate the input tax as well as the output tax, therefore it equals to 0.

[@Azndragon533]

If i am VAT Registered and im importing from outside the EU into the UK. Where and When do I pay the VAT to the Custom Agent? Do they just charge my HMRC Account and I Pay it via online?

[@FBA-Elite]

I pay it directly to my freight forwarder when the shipment arrives at a UK port.

[@Azndragon533]

@@FBA-Elite How do you Reclaim the VAT Made? Do you just add it back when you file your VAT Tax?

[@ezgimelodiezgi]

lets say you are selling in all europe and you are vat registered everywhere and Uk too where your biz is based, can you claim vat back that amazon charges for ads, fba, comission from germany, france, italy.... etc. sales with your Uk vat number?

[@ezgimelodiezgi]

or is it just amazon.co.uk that you can claim var back?

[@FBA-Elite]

Thanks for the question, i'm not 100% sure on this one as I am only selling on Amazon UK at the moment. However, with my other business it has always been the case that other European countries zero rate the VAT if you provide your VAT number so you don't pay the VAT in the first place. With this in mind I would expect Amazon to zero rate the VAT but I would recommend checking this with an accountant or Amazon themselves.

[@fleau7041]

If you have an UK company and sell items for exemple in France, you are elligible to dont pay vat until you get 85k sales ? And if you live in UK it works or it is only if you SELL in the UK ? Thanks if you know :p

[@FBA-Elite]

If you are in the UK and sell in France (and your stock is stored in France) you will need to be VAT registered in France from Day 1. You will only need to register for VAT in the UK once your turnover reaches £85000 in a 12 month period.

[@fleau7041]

@@FBA-Elite Thanks ! so if you sell in France (and your stock is stored in France) and you sell 70k in France and 0 in the UK, you have to pay VAT (French) After that if you sell 15k in the UK, you dont pay VAT, and after that you need to register VAT in the UK (because we are at 85k). Maybe we dont pay vat in France if the stock is in the UK :p Thansk you !

@@fleau7041 You also can use EFN to send your items from UK warehouse to France. In that case VAT threshold is 35000€ for France.

[@mileady777]

You need to make sure, that VAT invoices for these fees are issued on you GB VAT, and Amazon used its GB VAT number, not any other VAT number, otherwise, you cant reclaim any VAT charged despite it being 20%.

[@0xNobody]

I wanna see if Im doing something wrong. Price Bought with VAT 80,74 Price Bought without VAT 67,28 Price Sold with VAT 98,18 Price Sold without VAT 81,82 AMAZON FEES for this one is 14,73 (that's 15% of the price Sold with VAT, my amazon fees dont have VAT- im not being charged vat so I do not reclaim it) How would you calculate the VAT needed to be paid on HMRC? Would it be (98,18-81,82) - (80,74-67,28) or am I missing something? My profit on this order according to my calculations and the info above would be minus 0.20 (-0,20). Is that correct?

[@FBA-Elite]

The easiest way is to deduct the VAT you paid from the VAT you will be collecting on your Price Sold e.g. 1) 80.74 - 67.28 = £13.46 2) 98.18 - 81.82 = £16.36 3) £16.36 - £13.46 = £2.90 Payable to HMRC Yes based on those figures you would make a small loss.

[@cozu7219]

In conclusion, how is better to start, buying from UK suppliers and selling on AMAZON UK, like VAT voluntary registered or not? Thank's!

[@FBA-Elite]

Buy from suppliers that provide high quality products at a low enough cost for you to be able to make a profit on - the location isn't important if these two factors are ok. Only register for VAT when you hit the threshold (unless you are not living in the UK and then you will need to register on day 1).

[@denisyanchoglov5132]

!!!Thanks, but I have a question!!! I cannot understand how to pay VAT and when ?? I am not VAT registered (as I've just started selling), my items are on the way and it's already arrived to the UK, but I did not receive any VAT & Custom Duty to pay for, why? When it actually happens ? I really do not understand how you do it guys? Video is ok, but the part of main info is missing, where is that point explained how and when exactly pay the VAT & Custom Duty? I need to receive something by post ? Help me , who knows, could you explain me please?

[@davyjones1221]

How did you get the items? Did you do it DDP or Express way? If you made DDP it means supplier already paid your VAT Cost. So you don't have to pay If it's express. Your VAT bill will be coming to your address. Just give more information which shipping company did you use

[@nosraep9184]

During the VAT registration process (I am overseas) HMRC proposed 6.5% flat rate as my provisional turnover is less then 150k PA. Sounds great until you find out you cannot claim back the Input VAT (Import & Amazon). I ran a couple of examples and unless the ROI was around 117% ( 54% Margin) this is definitely not attractive.

[@FBA-Elite]

Yes flat rate VAT can be tricky, it's usually good for companies with low overheads so for us FBA sellers it probably isn't beneficial.

[@davyjones1221]

you can't claim back anything but it's low flat rate on the other hand how you will be stay around 150k

[@jamescrenshaw5097]

So Amazon in effect collects the output VAT but in no way ever remits this to the government, the total sale less the fees and input VAT are remitted to the seller every couple weeks. The fundamental reason for the profit margin results you have is that the registered seller is selling at the same price as the non-registered seller.

[@patelmanish9157]

How can so TOMS working as tour operator

[@FBA-Elite]

I'm not 100% sure what you are asking?

[@ravishantilal5506]

‘Taxes’ that was showing in amazon fees wasn’t the VAT? £1.30

[@massiveaction2371]

theres a rumour government may lower the VAT threshhold this year too. lets hope they dont!

[@FBA-Elite]

Hopefully not, I think those plans were quashed at the end of last year - it's hard to predict what will happen though with the current political uncertainty.

[@laxide13]

UK VAT is ridiculously high

[@Rafi-ul3xv]

Hey Darren this method of calculation is wrong you only pay one time VAT how can you pay £3.33 VAT and also pay VAT for Amazon Fees and Landed Cost? That is not how it works you already paid £1.04+£1.30=£2.34 VAT fees for(Amazon Fees and Landed Cost) , so now you will only pay £3.33-£2.34=£0.99, all together you will pay £3.33

[@mistercutex007]

Rafo, you are right to a degree. Another way to calculate the VAT owed to the HMRC is to use the "net remittance" model by simply netting off input Vs output VAT to arrive at £0.99. However, Darren's example is also correct - he has accounted for the VAT to be remitted by simply using the ex VAT unit sell price £16.67.