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After the new year, the long-awaited VAT withholding by the platform has finally come. According to feedback from many sellers, orders on Amazon UK site are now directly withheld and paid 20% VAT during the sales process. Regardless of the product price or shipping cost, 20% VAT will be directly deducted. In fact, Amazon officially announced this news a long time ago. In October last year, the official sent a wave of emails to remind sellers to pay attention to the changes in VAT policy after Brexit. We all know that many sellers in the UK are using preferential tax rates to make low declarations, and some sellers are even making zero declarations to make quick money. Now Amazon has directly deducted the tax from the order, leaving sellers with no room for maneuver. If they want to maintain profits, they can only raise prices .
Even some self-shipping sellers whose remote sales do not reach the tax standard have to start paying taxes on each order , which is quite disadvantageous to small sellers.
However, if the seller's business in Europe has always been operating in compliance, this new change will not have a significant impact on costs. At most, it will be painful to see that money is deducted for each order, which is actually a one-time tax that is distributed to each order. However, some sellers who have secretly calculated the tax rates will find that the actual tax rate does not seem to be charged according to the standard rate. What is going on? Is the tax rate 20% or 16.7%? Some sellers said that after calculation, they found that the ratio of the deducted tax to the product sales price was not the standard rate (20%), but 16.7% . Did Amazon underestimate it? In fact, the Amazon platform assumes that the price quoted by sellers includes taxes. For example, if we price a product at 10 pounds, the 10 pounds includes the product price + tax . If we calculate it backwards, the actual selling price of the product is 10/(1+20%), which is 8.33 pounds, and the tax is 8.33*20%, which is 1.67 pounds , which is exactly 10 pounds. Some sellers actually calculate the 16.7% tax rate by using tax/tax-inclusive price. In normal operation, sellers do not use tax-free prices very often, and directly use the quoted price as the selling price. Therefore, considering the convenience, it is not a big problem to directly regard the tax rate as 16.7% during operation. However, if tax operations (tax refund, etc.) are involved, the tax-inclusive price and product selling price must be clearly understood . Some sellers may wonder under what circumstances taxes will be automatically deducted. In short, there are two situations: 1. For self-delivery (delivery from abroad to the UK), tax will be automatically deducted for units priced below £135; 2. Domestic deliveries such as FBA will automatically deduct taxes (unless the account owner is a UK company).
In other words, the vast majority of sellers on the UK site are required to automatically deduct taxes, so sellers who have not prepared for compliance in advance must recalculate their profit margins and not wait until the inventory to discover losses. When it is time to raise prices, you should do so. If the order volume decreases after the price increase, you can try a large-scale promotion first, and then gradually reduce the intensity. With some keyword re-positioning and optimization, you can slowly increase the order volume and ranking. In my opinion, automatic tax deduction is a good thing for most UK sellers, at least everyone is back to the same starting line. For sellers who have always reported and paid taxes truthfully, the sellers who evaded taxes before can no longer take advantage of them. Everyone feels comfortable and everything tastes delicious. Mom no longer has to worry about me being taken advantage of by my peers! If nothing unexpected happens, EU sites such as Germany, France, Italy and Spain will also start to have unified tax deductions from the platform on July 1 . In addition, Xiaozhi would like to remind fellow sellers that although the taxes are directly deducted by the platform, the tax declaration still needs to be handled by the sellers themselves . Everyone must remember to declare on time. Do not let tax problems affect store operations due to failure to declare taxes accurately on time!
(Source: Maiwen)
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