If You enter the phrase „My VAT is missing on my Amazon FBA return/reimbursement“ into Google search engine You will find that this is a common issue among Amazon FBA sellers who enrolled themselves into Amazon VAT Calculation Services.
There are a lot of discussions on Amazon Seller Forums regarding this issue.
Some claim that VAT is missing on refunds/reimbursements because Amazon FBA sellers receive these refunds/reimbursements from Amazon Luxembourg, i.e. Amazon Luxembourg buys the missing/lost/damaged goods from Amazon FBA sellers, therefore, Amazon Luxembourg shall account these refunds/reimbursements as buyer of goods using the reverse charge method. Others claim that such refunds/reimbursements shall be treated as insurance pay-out by Amazon, therefore, exclusive of VAT.
However, none of these assumptions are correct.
Let’s check Amazon`s FBA Customer returns policy and Amazon`s FBA lost and damaged inventory reimbursement policy. Both policies states that: “[…] we will reimburse you for the estimated proceeds of a sale of that item. “Estimated proceeds” means the estimated sale price of the item for which you are being reimbursed minus referral fees and fulfilment fees. The estimated reimbursement amount excludes local standard applicable VAT rate […]” or “[…] If an item is refunded on your FBA order, we will reimburse you the proceeds from the sale of the item net of the applicable FBA fees and local standard VAT rate […]”.
Let’s take such situation as an example:
Amazon FBA Seller has made a sale worth of 100 GBP + UK VAT (21%). The total amount of the sale is 120 GBP. 100 GBP minus Amazon fees goes to the seller and 20 GBP goes to HMRC.
Now, let’s imagine that:
a. Customer is not satisfied with the product and he requests a refund from Amazon; Amazon refunds the customer before the item is returned, however, Amazon never receives the item back;
b. Item is lost during the delivery to the customer;
c. Item is damaged during the preparation for the delivery at Amazon warehouse;
d. Item is damaged before being put into Amazon FBA seller`s stock.
How does Amazon FBA seller shall account a, b, c and d refunds/reimbursements for VAT purposes?
a, b and c: Amazon FBA seller shall issue credit note to the customer and make an adjustment for the paid VAT in his next VAT return; if Amazon will find the item in a and b situations later, they will sell it in their Amazon Warehouse Deals to recoup their losses, therefore, it will be considered that Amazon made a sale and Amazon is liable for any VAT due.
d: as the item was damaged before even listing it on the Amazon FBA seller`s stock, Amazon treats that there was no sale, therefore, they pay compensation to You, which is not subject to VAT, but allows the Seller to deduct input VAT. This compensation is called an estimated sale price. Estimated sale price is calculated based on factors such as:
- Your current list price for the item on Amazon
- The average price at which you have sold the item on Amazon over the past 90 days
- The average current list price for same item by other sellers on Amazon
- The average price at which other sellers have sold the same item over the past 365 days
If Amazon don’t have enough information to calculate the estimated sale price of a unit using the price indicators described above, they will assign an estimated sale price based on the price of a comparable product.
1stopVAT can help You to handle all Your refunds and reimbursements like on Amazon platform, so as on any other
