What is VAT? VAT Review

Overview

As for the UK, when goods enter the UK (according to EU law), they are subject to import tax; when the goods are sold, the merchant can refund the import value-added tax (IMPORT VAT) and then pay the corresponding sales tax (SALES VAT) based on the sales amount.

Import VAT = (declared value + first-leg freight + DUTY) X 20%

VAT rates in EU countries

There are three VAT rates in the UK:

20% standard rate (applies to most goods and services)

5% low tax rate (such as household electricity or gasoline, etc.)

0% tax rate (applicable in very special cases)

2. Standard tax rates in other EU countries

Germany: 19%

France: 20%

Italy: 22%

Spain: 21%

VAT calculation example

The price of the goods includes VAT. For example, the final selling price of a product in the UK should be 120 pounds, and 20 pounds is the VAT after the product is sold.

For example:

Declared value = 100 pieces * 100 pounds/piece = 10,000 pounds,

First leg freight 2000 pounds DUTY = 10000 * 3.7%

Import VAT = (declared value + first-leg freight + DUTY) X 20% = (10000 + 2000 + 370) X20% = 2474

*This import VAT of £2,474 can be deducted from sales tax when making quarterly returns.

Sales are divided into 3 situations for analysis:

1. No sales-----------sales tax is 0, net tax refund is 2474 pounds

2. All goods are sold--------------sales amount is 20,000 pounds, sales tax is 20,000/6=3333.3,

The tax payable is 3333.3-2474=859.3 pounds

3. Half of the goods-------------sales amount is 10,000, and the sales tax is 10,000/6=1,666.6,

The tax refund is 2474-1666.6=807.3

Returned goods are counted as inventory if they have cleared customs and all relevant supporting documents are complete, and no sales tax is required.

Amazon remote sales tax declaration

a. Reasons

Remote sales refers to the transaction amount from the local warehouse directly to the customers in other countries. Tax declaration is made in the country where the shipping warehouse is located. However, if the goods are transferred from the local warehouse to the warehouse in other countries and then shipped to customers in other countries, then VAT registration for other countries is required.

b. Distance sales tax

UK GBP 70,000; Germany EUR 100,000; France EUR 35,000; Italy EUR 35,000; Spain EUR 35,000; Poland PLN 160,000; Czech Republic CZK 1,140,000

Note: When the distance sales tax exceeds the distance sales tax amount, it is necessary to register for VAT in the local country for declaration.

The difference between domestic value added tax and VAT

About flat vat

Application Requirements

Sellers with annual sales of less than 150,000 pounds can apply for flat VAT. Generally, most Chinese sellers' products are taxed at 6.5% in the first year (the first year after VAT takes effect) and 7.5% in the second year, but the VAT paid for imports cannot be deducted. And the final tax rate needs to be determined after the tax bureau has determined the tax rate.

If your annual sales do not exceed 230,000 GBP, you can continue to use this low tax rate. In the second year, your tax rate will return to 7.5%, and you will pay VAT = sales * 7.5%.

The difference between Flat vat and Standard vat:

The application process is the same, the difference is that the import VAT using STANDARD VAT is deductible from the sales VAT, while with FLAT VAT, the import VAT cannot be deducted from the sales VAT.

Payment of VAT

After registering for a VAT number, there are two ways to apply for tax refunds and tax payments: one is to use the official online operating system of the British tax department to declare by yourself; the other is to designate a formal accountant to do it on your behalf. Since European tax declarations require very professional tax knowledge and foreign language skills, it is recommended to entrust a professional accountant to assist in completing tax declarations. On the whole, domestic Amazon sellers need to pay very little VAT to the British government. They only need to pay (sales tax VAT-import VAT), and the sales tax VAT is already included in the product price and is borne by the consumer himself. It should be noted that after the VAT tax number application is approved, please be sure to file a tax return once a quarter to avoid the VAT tax number being frozen by the government.

Note:

1. Once you apply for flat vat, you cannot cancel it midway. You must declare it for 4 quarters. If you do not apply for cancellation after 4 quarters, you will have to continue to use flat vat for 4 more quarters (even if you declare zero, you must complete 4 quarters and cannot cancel it, unless the account is cancelled), unless you feel that your annual sales will exceed 230,000 pounds. At this time, you must apply to the tax bureau 2 months before the next declaration to adjust the flat vat back to standard vat.

2. After applying for flat vat, you must declare for 4 consecutive quarters (even if you declare zero, you must complete 4 quarters and cannot cancel, except if your account is cancelled). If you do not apply for withdrawal after 4 quarters, you must continue to use flat vat for another 4 quarters, and so on. Every four quarters is a stage. If you want to withdraw, you must apply 2 months before the end of the stage.

For example: if you file a claim in March, June, September, and December, and you file in March 2016, you can start using flat vat in June. You can apply to withdraw from flat vat after the March 2017 claim. If you do not withdraw, you will have to continue using flat vat until after the March 2018 claim. In short, you can only withdraw from flat vat if you file in April and May of each year.

3. If you feel that your annual sales will exceed 230,000 pounds, you must apply to the tax bureau to adjust the flat vat back to the standard vat at least 30 days before the next declaration.

4. If you use flat vat, you must declare 100% of all Amazon data. The UK will frequently audit FLAT vat. If your account has sales before VAT or has underreported before, the risk will be very high. If you are audited, in addition to paying all unpaid taxes, the tax bureau will determine the amount of the fine based on the circumstances.