Amazon FBA: Selling Options, Advantages, VAT duties

If you are selling on Amazon Europe, you can decide between two different possibilities of warehousing and despatch of your products: FBA (Fulfilment by Amazon) or FBM (Fulfilment by Merchant). FBM is especially lucrative for sellers of unique items, custom-made or niche products who do not have a big sale quantity and who do not need to profit from Amazon logistics, storing, despatch or customer service.

Selling with Amazon FBA

FBA, short for Fulfilment by Amazon, is a service of Amazon which offers commercial sellers to store their goods in local warehouses of Amazon. They will be stored there until an order from close is made and the product will be delivered from the warehouse which is the closest to the customer.

This way, customers get their products very quickly and FBA products are trusted most by the customers.

Advantages of Fulfilment by Amazon (FBA)

Fulfilment by Amazon offers a variety of advantages for its users. Depending on your company, there are several fulfilment types to choose from and logistics, warehousing and distribution will become much easier.

Furthermore, the visibility and consequently the traffic on Amazon will increase as FBA-products have, because of the fast delivery, the same listing as Amazon’s products and for sellers who want to expand to more than one European Amazon market, FBA is the easiest and the most cost-efficient way.

Of course, this service is not free of charge and a fee has to be paid on every sale.

Many Amazon Sellers make use of FBA and let the e-commerce giant take care of the entire logistics process and the sellers themselves can reduce their workload. However, the taxation aspects are what the sellers needs to do by himself.

Naturally, all active sellers need to register with the local tax authorities before they start selling and tax returns and filings will be due on a regular basis.

VAT duties for FBA sellers

As mentioned before, using FBA requires at least one proper VAT registration as well as ongoing VAT returns. Expansion within Europe can lead to a need of additional VAT numbers (see distance selling).

So, the seller needs to ensure vat compliance, not Amazon. Since 01.01.2019, Amazon is liable for VAT fraud of people selling on the platform – at least in Germany. Germany has passed a new VAT law that makes marketplaces liable for any kind of VAT fraud that happens on their platforms.

To avoid this liability, Amazon and eBay ask sellers to provide them a new VAT form (F22). This excludes them from being liable and at the same time allows the authorities to access all sales data from the past.

Using FBA gives sellers the opportunity to choose between different types of fulfilment, namely EFN, CE and PAN EU. In the next chapters these fulfilment types will be explained and compared.

A Comparison: EFN, CE or PAN EU?

This chapter shall remove the last doubts and show which way of fulfilment is the best for a company taking into account the current size and the turnover. All 3 FBA types will be explained and compared. With each of this services, different rights and duties come along. Using the option that fits best to a company in its current state can boost sales tremendously

EFN: Amazon’s European Fulfilment Network

The European Fulfilment Network (EFN) allows FBA sellers to store their inventory in one of Amazon’s local Fulfilment Centres all across Europe and fulfil national orders, or orders coming from other European marketplaces, from the same local inventory pool.

The European Fulfilment Network simplifies the inventory management by keeping all inventory in one local pool, in one Fulfilment Centre, maximizing the control and flexibility of all goods.

FBA inventory can be listed for sale on all of Amazon’s European Marketplaces using a single selling account. Orders from these marketplaces will be fulfilled from the FBA inventory using Amazon’s fast and reliable European Fulfilment Network.

Here you can find Amazon’s fulfilment fees.

Who is it for?

The European Fulfilment Network (EFN), a good opportunity for businesses in the early stage of development. EFN allows you to sell throughout Europe, however, when a certain export limit is reached, storing all over Europe with another FBA type can make more sense. As just mentioned, for the beginning it’s just perfect. Especially because it’s little paperwork, you get a higher visibility on Amazon and of crouse the Amazon Prime status.

Advantages Disadvantages
Prime Higher storage fees
Only 1 VAT number require Higher cross-border fees
Perfect for small businesses Longer delivery time

CE: Central Europe Program:

The Central Europe Program allows storing in Germany, Poland and the Czech Republic. It’s ideal for companies that are a little bigger, starting at about a turnover of 500 units/month.

FBA inventory can be stored in all three of those countries, additional fulfilment networks can be used, the fulfilment fees per FBA unit are 0.50€ lower and the shipping efficiency is increased.

AdvantagesDisadvantages
Lower fulfilment fees (0.50€) VAT registration in Poland and in the Czech Republic
Additional fulfilment centres
Shorter delivery time  

Selling via Pan-European FBA  

Pan-European Fulfilment by Amazon: this service helps FBA sellers to sell their goods to Amazon customers across the EU more efficiently than ever before. Fastest deliveries and the lowest costs are only two of the many benefits. More about that in just a moment.

Pan-European FBA enables sellers to deliver their inventory to a local fulfilment centre for Amazon to take care of the logistics; automatically shipping sellers’ products across its European Fulfilment Network according to the anticipated local customer demand. The product will then be fulfilled from the closest warehouse.

The Pan-European FBA service can also help sellers to grow their business by making their products eligible for Amazon Prime, meaning they will have access to millions of Amazon’s most loyal customers, along with Amazon’s trusted and acclaimed customer service.

How Pan-European FBA works:

1.      Start:

Sellers enrol products that are eligible for Pan-European FBA.

2.     Shipping:

Sellers ship Pan-European FBA enrolled products to a local Amazon Fulfilment Centres, based on the anticipated local demand (no extra costs for the seller);

4.     Orders:

When customers order the products, Amazon will handle the fulfilment logistics and provide fast, reliable delivery from the closest fulfilment centre where the product is available;

5.     Fees:

For the delivery, sellers will only pay the local fulfilment fee of the marketplace in which the product was ordered, there is no cross-border fee.

Is Pan-European FBA the right choice for me?

It the best solution for big sellers with a turnover of at least 1,500 units/month. PAN European FBA gives sellers the opportunity to store their goods in all of Amazon’s warehouses across Europe. This ensures the fastest delivery times and further, all products get Prime status. The customer usually gets his order on the next weekday.

Advantages Disadvantages
Low fulfilment costs VAT Registration in all countries you store in
Fastest delivery Loads of duties and paperwork
Prime status

Conclusion

FBA sellers should focus on their sales when it comes to the decision which service to pick. The rule of thumb is the following: EFN, if the monthly turnover is less than 500 units, CE when the turnover is between 500 and 1,500 units per month and PAN EU if the sales are higher.

However, it can also be a possible expansion strategy to choose PAN EU right in the first place – but only if it pays off in the end. Mainly the increasing bureaucratic burdens and the administrative duties are factors that slow down the expansion process or simply overwhelm the seller. But at the end, Pan-European FBA is at least the level everyone should aim for.

You are looking for tax experts who handle your vat registrations, filings and reports? Get a free consultation from hellotax.

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