What is VAT? | How VAT Works for Amazon FBA Sellers

[@FastTrackFBA]

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[@fabiomoreira3290]

Hi Thomas, I have just registered for VAT and everything sounds new and scary. I heard that I will have now to change the VAT code on all my listings but I am not sure how to do that and don't knowhow to check which is the correct code for each product. If you are thinking of doing a new video on VAT can you through this process? Also, would be nice to discuss about different types of invoices / receipts you get from stores that are valid for VAT accounting. Thanks

[@FastTrackFBA]

Hey great idea and thanks. Do entered your VAT code into Amazon and they will do all the changes for you

[@alisonbenson2119]

Thanks for this video, it’s come at just the right time for me.

[@FastTrackFBA]

You welcome!

[@markclay9648]

As always. Cracking advice which is undoubtably gained by experience.......which is always good..

[@FastTrackFBA]

Absolutely, I remember having to get my head around VAT, it was not fun

[@simonaplekancova4225]

Nice video as iam approaching threshold in very short future. Also had to dig deep in my memory to do math for formula. Lol. Couldn’t understand why it’s £166 VAT from £1000 and not £200. Got it now.

[@FastTrackFBA]

Glad it was helpful and that is common question!

[@FahadKhan-fq4zw]

Very informative and well explained. ***

[@FastTrackFBA]

Glad it was helpful!

[@riquellelondon5711]

Great video thank you, i have watched this one and the others about Tax. However, i have a question about the calculations as i note you have managed to get £2.36 profit as a registered VAT seller whereas when i do it i get £0.53 profit so i must be going wrong somewhere, and i really want to get it right. I have done £14.16 (Net sales) - £5 (Net product) - £6.80 (Amazon fees FBA & Referral) - £1.83 (Owe HMRC Output tax £2.83- Input tax £1) = £0.53 profit . Thank you.

[@FastTrackFBA]

i think you posted this in the group right

[@zyzor9287]

When starting and under the VAT threshold you imply that the seller has a slight financial advantage by NOT registering for VAT. However, in that scenario the seller cannot reclaim VAT charged on other services and supplies, the totality of which could offset the gain of the initial financial advantage. So bottom line would I be better off overall getting VAT registered from the get go?

[@FastTrackFBA]

Yes you're right mate, being VAT regisered is more feasible. It's just that on the computation in the video basically shows that being VAT reg is lower than non VAT reg

[@zyzor9287]

What I did not understand is how the VAT is calculated from the selling price on Amazon. Is the selling price inclusive or exclusive of VAT? Or do I assume that Amazon adds the VAT to the selling price, collects the VAT from the customer and then pays it directly to the HMRC so we as sellers don't have to worry about it?

[@FastTrackFBA]

Amazon charges VAT depending on the product based from HMRC rules. Please take note that it is our due diligence to pay VAT to HMRC. An accountant would be necessary for our Amazon business if we want to pursue Amazon selling

[@englishwithme9922]

@@FastTrackFBA so some items won't be charged

[@Erks89]

Thanks Thomas, does it reset every year if you didn’t meet the threshold?

[@FastTrackFBA]

Great question. Its based on a rolling 12 months, You can see more information here www.gov.uk/vat-registration

[@cryptoearningweapon8546]

Fantastic video. Do you know of any good accounts we could do our on due diligence on, maybe a referral. Many thanks

[@FastTrackFBA]

Check out this video with Joe who is my accountant, hes great and runs an Amazing Accoutancy firm kzbin.info/www/bejne/hJ67YY2Dh611mrs

[@FahadKhan-fq4zw]

Just a quick question , when we use FBA calculator on seller central , then the ref fee and FBA charges show up ex VAT?

[@FastTrackFBA]

Yes that is correct

[@englishwithme9922]

i got this email regarding Declare your VAT exemption status and automate your invoicing‏‏ would i still pay vat for fees in amazon

[@FastTrackFBA]

If you're above 85K treshhold, you will not pay VAT on Amazon fees

[@englishwithme9922]

I've just noticed that am been charged vat on my FBA fees, am not a registered business just a sole trader, does this seem right

[@FastTrackFBA]

Have you asked an accountant why?

[@talipyaldaz4214]

I'm not a VAT registered however Amazon collects VAT under "MARKETPLACE FACILITATOR TAX" from all sellers even tho we are under £85k threshold. how do you explain this mate

[@FastTrackFBA]

May we know your annual turnover? This would usually be triggered by an annual threshold (85k).

[@abdulwali4920]

bro please confirm if I am right? my sales are below 85000 and i am not vat registered. If I list a product on amazon uk at a price of 10, customer will buy this product at 12(including 20% vat os sale price). amazon will hold payment for 14 days and will send me 12 dollar after minusing only referal fee and vat on referal fee. right?.. amazon has nothing to do with 20% percent vat paid buy customer on purchase price?

[@FastTrackFBA]

Yes, Amazon has nothing to do with the VAT. You can't reclaim it also since you're not VAT registered.

[@nataly10]

thanks)

[@FastTrackFBA]

Thank you too!

[@ravishantilal5506]

Does the Amazon Seller app include VAT when calculating the profit? Because I don’t see they provide VAT so the NET PROCEED is different when we add into inventory in PC and it’s different in app in phone.

[@FastTrackFBA]

Nope they don't. I would suggest for you to use sourcing calculator tools.

[@ravishantilal5506]

@@FastTrackFBA okay thank you. I have one question in regards to VAT. If you are VAT registered do you still pay VAT on their fees to amazon?

[@FastTrackFBA]

@@ravishantilal5506 Nope you wont. it will be stopped once you've became VAT registered :)

[@ravishantilal5506]

@@FastTrackFBA So that means you always needs to calculate sales VAT before purchasing the product and minus that by profit to see the actual price, I understand we can claim purchase VAT.

[@FastTrackFBA]

@@ravishantilal5506 correct

[@bradparsonsmusic]

Thanks for this. A couple bus if you dont mind.. I am voluntary flat rate VAT registered, will this affect anything? Also, I am registered for music business (not e-commerce). If I go exempt on Alibiba do I have to charge VAT on my amazon stock? Thanks.

[@FastTrackFBA]

For this matter, it is best for you to check our community. Our specialists will surely give you great insight into it. Here is the link UK facebook.com/groups/fasttrackfba USA facebook.com/groups/fasttrackfbausa

[@nassah2010]

Hey tom can you voluntarily register for VAT if less than 85k? are there benefits

[@FastTrackFBA]

No mate, the threshold is 85K

[@nassah2010]

@@FastTrackFBA i checked the gov website, you can register for vat below 85K. Not sure why you would though

[@ravishantilal5506]

But Amazon doesn’t charge VAT on fees or anything even for VAT registered

[@FastTrackFBA]

The only difference is that when you're non VAT registered, your Amazon fees has 20% VAT charge while if you're a VAT reg seller those fees will be gone.

[@ravishantilal5506]

@@FastTrackFBA Oh right

[@ravishantilal5506]

@@FastTrackFBA So how do we find out how much VAT we paid to Amazon for the fees?

[@FastTrackFBA]

@@ravishantilal5506 Multiply each fee to 20%

[@ravishantilal5506]

@@FastTrackFBA So are we paying amazon any vat on fees after being a vat registered or not?

[@talalfarooq432]

12:47 20% of 17 is 3.4 not 2.83!!

[@FastTrackFBA]

Great highlight, although you have to understand the £17, already includes the VAT at 20% of the Non VAT Price So Ex VAT price = £14.16 Total Inc VAT Price = Ex VAT Price + VAT (20%) = £14.16 + (14.16 * 0.20 = £2.83) = £14.16 + £2.83 = £17.00 (with 0.01 round error) I hope that explains it

[@keshalagasi7501]

@@FastTrackFBA I was confused too, but I went back to your previous video on this playlist on computing OUTPUT VAT. He was telling about the OUTPUT VAT, not just the tax. Meaning you have to get the difference of VAT from selling price and product cost. In my computation, it goes like this. SELLING PRICE: £17 Product Price w/o VAT: £13.6 *VAT from SELLING PRICE: £3.4 PRODUCT COST:£5 Product Cost w/o VAT: £4 *VAT from PRODUCT COST: £1 [OUTPUT VAT FORMULA (difference between the VAT*) VAT from SELLING PRICE - VAT from PRODUCT COST £3.4 - £1 = 2.4 Although, I didn't get the same output, but close. I think there is something I am missing. I hope that I will get an answer too.

[@lovereyes864]

Hmm, £17 includes the VAT, just divide it by 1.20 (20% tax) to get the price EX VAT which is £14.16 then less it by £17 to get the output VAT of 2.83