The ECommerce terrain within the European Union underwent a seismic shift following Brexit, presenting Amazon EU sellers with a new array of challenges and adjustments.
As the UK parted ways with the EU, significant changes in regulations and operational frameworks emerged, affecting sellers on multiple fronts. This transition has especially impacted aspects like VAT compliance, fulfillment processes, and customs regulations. The introduction of new VAT rules, alterations in Amazon's Fulfillment by Amazon (FBA) program, and the necessity of obtaining an Economic Operators Registration and Identification (EORI) number have become key focus areas.
In this guide, we delve into each of these key changes to understand the revamped VAT system, adapt to the updated FBA logistics, and navigate the complexities of EORI requirements. These elements are pivotal in reshaping how Amazon EU sellers conduct business in this new post-Brexit era.
VAT Changes for Online Marketplaces
The post-Brexit era brought significant changes to VAT (Value Added Tax) regulations for online marketplaces, impacting Amazon EU sellers profoundly. Effective July 1, 2021, the European Union implemented new VAT rules that altered the ECommerce tax landscape. One of the most notable changes was the removal of the €22 VAT exemption. Previously, imports of small-value goods under €22 were exempt from VAT. With Brexit, this exemption was abolished, making VAT applicable to all goods, irrespective of their value. This change aimed to level the playing field between EU and non-EU sellers and ensure fair competition.
Another critical shift was the change in the basis for VAT calculation. VAT is now charged based on the buyer's location rather than the seller's. This means that when selling goods to customers in different EU countries, the VAT rate of the customer's country applies. For Amazon EU sellers, this introduced the complexity of dealing with multiple VAT rates across the EU.
Online marketplaces like Amazon have taken on significant new responsibilities in this new VAT framework. They are now responsible for collecting and reporting VAT for sales of all goods delivered within the EU with a value up to €150. This change in liability has relieved individual sellers from the burden of VAT compliance for these transactions. They, however, still need to be aware of the VAT rates applicable in different EU countries and ensure their pricing strategies reflect these changes. The new VAT rules necessitate a thorough understanding and adaptation to ensure compliance and optimized pricing strategies in this new tax environment.
The IOSS and OSS Schemes
In response to the complex VAT changes, the European Union introduced two schemes to simplify VAT processes for sellers: the Import One-Stop Shop (IOSS) and the One-Stop Shop (OSS). These schemes are designed to streamline VAT charging and reporting, especially beneficial in light of the new rules where VAT is charged based on the buyer’s location.
The IOSS is particularly useful for sellers dealing with goods imported into the EU with a value of up to €150. By registering for the IOSS, sellers or online marketplaces can charge and report VAT on these low-value goods at the point of sale, simplifying the process for both sellers and buyers. This means that VAT is collected when the sale is made, and sellers can declare and pay this VAT in a single monthly IOSS return, regardless of where the goods are sent within the EU.
The OSS, on the other hand, is designed for intra-community sales of goods and services. It allows sellers to report and remit VAT for sales in all EU countries through a single electronic quarterly return in the Member State where they are identified. This simplifies VAT compliance by reducing the need to register for VAT in every EU country where they sell.
Both the IOSS and OSS schemes represent the EU’s effort to reduce administrative burdens on sellers while ensuring VAT is correctly charged and collected on cross-border sales.
Amazon FBA Updates Post-Brexit
Amazon's European Fulfillment Network (EFN) underwent significant changes following Brexit, impacting how sellers manage cross-border fulfillment and inventory. Initially, Amazon announced the suspension of its EFN service between the UK and EU. This suspension meant that sellers could no longer use a single inventory pool to fulfill orders across both the UK and EU markets. The implication was clear: sellers needed to split their inventory and maintain separate stocks in both the UK and EU to continue selling in these regions. This change posed logistical challenges that required sellers to reassess their supply chain and distribution strategies.
In a welcome development, however, Amazon announced the reactivation of the EFN in March 2022. This reactivation allowed sellers to resume cross-border fulfillment from a single inventory location, albeit with new fee structures and operational guidelines. The EFN reactivation has been instrumental in simplifying logistics for sellers, enabling more efficient management of cross-border orders and reducing the complexities associated with separate stock management for the UK and EU.
Amazon’s Build International Listings (BIL) tool has become a vital asset in this new landscape. Located in the 'Sell Globally' dashboard, the BIL tool assists sellers in expanding their reach across different Amazon marketplaces. It simplifies the process of listing products in various regions, managing price adjustments, and aligning with regional requirements. This tool is particularly beneficial for sellers looking to navigate the post-Brexit changes efficiently, allowing them to streamline their international selling strategy while maximizing their presence across Amazon's global platform.
EORI Requirements for UK-EU Trade
Post-Brexit, the Economic Operators Registration and Identification (EORI) number has become a crucial component for businesses engaged in trading between the UK and the EU. The EORI number is a unique identifier, mandatory for all businesses that import or export goods in and out of the UK and the EU. It's used by customs authorities to monitor and track shipments, ensuring regulatory compliance.
Obtaining an EORI number is a necessary step for businesses to engage in international trade post-Brexit. For trading between the UK and EU, businesses may need separate EORI numbers: one from the UK and another from an EU country. The process involves registering with the customs authority in the respective jurisdictions. In the UK, businesses can apply through the HM Revenue and Customs (HMRC) website, while in the EU, the process varies depending on the member state.
For businesses not established in the region they are trading with, it becomes imperative to set up a legal presence or work with local representatives who can handle customs processes. This might involve setting up a subsidiary or finding a fiscal representative. Establishing a business presence for EORI registration may require additional steps like obtaining local business licenses, which can vary depending on the specific requirements of the country in question.
Challenges and Opportunities
Amazon EU sellers are navigating a post-Brexit terrain rife with challenges yet brimming with opportunities. The introduction of new VAT rules, the necessity for EORI numbers, and changes in FBA logistics have added multiple layers of complexity to selling on Amazon's EU platforms. Sellers now face the daunting task of understanding and complying with diverse tax regulations across different EU countries, adapting to altered supply chain and fulfillment processes, and ensuring seamless cross-border trade operations.
Despite these hurdles, the evolving Ecommerce environment presents significant growth opportunities. Sellers who adapt effectively to the new regulations can expand their market reach and enhance their competitive edge. Notably, embracing multi-region operations has proven lucrative, with 63% of Amazon sellers witnessing a surge in sales. Sellers with a presence in multiple regions have achieved 3x higher exit multiples compared to those confined to one or two markets.
These numbers underscore the potential rewards for sellers who strategically traverse post-Brexit changes by leveraging them to explore new markets and diversify their ECommerce portfolio. This adaptability ensures compliance and also paves the way for enhanced growth and profitability in the dynamic EU marketplace.
Navigating Post-Brexit Waters with OppDoor's Expertise
The post-Brexit era has ushered in significant changes for Amazon EU sellers, from intricate VAT compliance and FBA logistics alterations to essential EORI registrations. While these modifications present challenges, they also offer opportunities for strategic growth and market expansion. The key for sellers is to stay informed, agile, and adaptable to these new regulations.
For those looking for expert guidance through this terrain, OppDoor offers tailored services that help you navigate these changes with ease. We provide specialized support to ensure your business remains compliant and thrives in the evolving ECommerce environment. Embrace the new era of Amazon selling with OppDoor as your ally.
Contact us now for expert consultation and take the first step towards a seamless adaptation to the post-Brexit market!