Amazon – European Online Vendors and New Invoicing Rules

E-commerce giant Amazon has been very busy this year, facing various challenges from the perspective of business and tax. It has introduced important novelties to make its European business environment less challenging and improve tax compliance practices. 

The change starts with introducing the new service providers, who will now be responsible for invoicing. This change will automatically modify how the tax will be collected and reported. 

Before this latest novelty, Amazon Services Europe s.a.r.l, a Luxembourg company, was responsible for invoicing, and the vendor collected and reported the tax on a reverse charge basis. Practically, it meant that online sellers didn’t need to pay VAT upfront. 

What changed with the introduction of new rules? 

Let’s dive into the blog so we can see, simply and concisely, what was changed and how it will impact the online vendor’s business operations, invoicing, tax reporting, and disbursement flow carried out by Amazon. 

Timeline 

Starting from August 1, 2024, new rules introduced by Amazon will become effective. 

Scope of the changes 

Change of the service provider 

Until August 1, 2024, Amazon Services Europe s.a.r.l, the principal Amazon office in the EU based in Luxembourg, was responsible for invoicing and disbursement for online vendors whose places of business were within the EU and UK. 

Starting from August 1, 2024, Amazon Services Europe will become Amazon EU, with the head office in Luxembourg and nine branches in nine different countries. These offices will be in the UK, Germany, France, Italy, Spain, Netherlands, Poland, Belgium, and Sweden, and these branches will significantly influence the invoicing and disbursement processes. 

Invoicing rules 

Online vendors whose place of business or establishment is within one of the nine countries where Amazon EU has its branch will be invoiced by that branch and will pay tax on the Amazon fees upfront. Before this change, the tax has been collected on a reverse-charge basis.

 The online vendor indicated the tax charged on Amazon fees in the same return—the output part(levied on the Amazon fees) and the input part(claimed based on business expenses). 

However, the situation will be different with the new scenario in place. Amazon will charge the local VAT rate on its fees, and the vendor will be obliged to pay it upfront. The vendor will have the chance to reclaim this tax through a domestic return(quarterly or monthly). 

The second important thing to underscore is that the relevant supplier data(within the b2b supply of underlying Amazon service) will differ. The supplier of the Amazon service/s will be the local branch if the vendor is from the same country where Amazon has its branch. 

Disbursement 

The disbursement structure will be changed for online vendors established in one of the nine countries mentioned above. Amazon fees will be deducted from the sales, with the local VAT rate applied to those fees.

Online vendors whose place of business or establishment is outside these nine countries will not experience any change in disbursement. The tax will be levied and collected in the same manner as before the commencement of these changes. 

Amazon EU has introduced significant changes. These will undoubtedly impact a broad spectrum of European online vendors offering their products and services through Amazon. Vendors need to adequately address the new invoicing and taxation rules that derive from this change. 

Vendors will need to pay more attention to local tax practices to reclaim their expenses on Amazon service fees. Another important point to consider is the reduction of funds based on the upfront VAT payment on the invoices issued by the local Amazon branch.