Amazon Platform Email Notification
Abstract: January 1, 2021 after the UK tax euro, the platform to implement the withholding and payment of value-added tax. So, do Chinese sellers still need to make a declaration? What does the tax agent need to do?
On June 23, 2016, British voters voted to leave the European Union in the so-called Brexit referendum. This historic decision presents significant challenges and potential opportunities for all multinational companies trading with and operating in the UK. Negotiations between the UK government and the EU remain anxious, but a new tax reform for cross-border e-commerce is on the horizon. Here Green Circle Accounting Firm is going to unveil the new tax regulations that will come into effect on January 1, 2021 in the UK for sellers.
News
Background
At the end of the Brexit transition period, the UK government will introduce a new model of VAT collection. This will ensure that goods from EU and non-EU countries are treated in the same way and that UK businesses are not disadvantaged by competition from VAT-free imports. It will also improve the efficiency of VAT collection on imported goods and tackle the problem of overseas sellers failing to report VAT correctly on their sales.
News
Keyword Explanation
OMP (Online marketplace) is a sales platform (website or mobile application) that facilitates the marketing and sale of goods to customers, such as a marketplace, platform, portal or similar website. Sales platforms such as Amazon and eBay are OMPs.
Here's an example of the changes sellers will encounter under the new policy, following the various stages of a product's journey from shipment in China to sale in the UK:
01
Ching Kwan
- Removal of low value consignment relief. This means that consignments of goods valued at £15 or less will be subject to VAT (i.e. import VAT will not be payable at the point of import and will be paid directly at the point of sale).
- For goods imported with a value not exceeding £135, the point of VAT collection is shifted from the point of import to the point of sale. This means that goods with a value not exceeding £135 are only subject to the normal customs procedures, i.e. import duties are still payable, but no import VAT is payable.
The following types of consignments are excluded: non-commercial consignments, e.g. gifts (up to a value of £39, which can be exempted), and any goods subject to excise duty, goods from Jersey and Guernsey
- Imports of goods with a value over £135 follow the existing policy.
02
Sales
A. The point-of-sale goods are outside the UK:
If the OMP is not involved in the sales process and the seller sells the goods directly to a UK customer, the transaction is deemed to have taken place in the UK and the seller is liable for UK VAT.
If the OMP is involved in facilitating the sale, for VAT purposes, the OMP is the subject of the supply of goods and it is the OMP that is responsible for filing the VAT return.
In both cases, the value of the goods for the purpose of calculating VAT is the price at which they are sold to the customer, not the valuation calculated at the time of importation. (Combined with customs clearance, where no import VAT is paid and VAT is transferred to the point of sale)
B. The sales node is within the UK (i.e. using UK FBA warehousing or UK third party overseas warehousing):
Following the UK tax changes, VAT will continue to be a tax based on the sale of goods as it is now, but the significant change here is that OMPs will be treated as suppliers and will therefore be responsible for accounting for VAT on goods sold through their platform. This means that sellers operating through OMP will no longer be supplying goods to UK consumers for VAT purposes.
Below is the process for VAT incidence and seller reporting after the tax reform:
- Sales in which the OMP is involved: the tax liability is transferred to the OMP, the seller's tax is withheld and paid by the OMP, and the transaction between the seller and the OMP is a zero-rated supply transaction, which still needs to be reported in box 6 as gross sales, but with a VAT value of zero.
- Sales in which OMP is not involved: the current policy remains unchanged and sellers are still responsible and liable to report and pay VAT.
03
VAT Registration
A. Sellers whose goods are outside the UK at the time of sale and who build their own OMPs to sell goods to UK customers.
B. any undertaking whose goods are outside the UK at the time of sale and which sells goods directly (without OMP's involvement) to UK customers which are (a) outside the UK at the point of sale (b) goods imported into the UK at a value not exceeding £135.
C. For Sellers with warehouses in the United Kingdom, the registration obligation remains unchanged.
04
B2B Orders
A. If the Buyer is a VAT registered UK business, the liability for VAT accounting will be transferred to the Buyer upon provision of a valid VAT number to the OMP/Seller. In this case, the OMP/Seller is not liable for VAT, i.e. a zero-rated order under the reverse taxation principle.
B. If the buyer is not registered for VAT or does not provide OMP/Seller with a valid VAT number at the time of purchase, then the transaction shall be considered a business-to-person sale and OMP/Seller will be liable for VAT.
C. The OMP/Seller is not obliged to proactively verify whether the customer is a business or an individual and all sales are assumed to be business to individual unless the business buyer provides a valid VAT number.
05
VAT credits or refunds (processed by the tax agent for the seller)
The seller's credit still needs to be declared by the accountant. Under the standard tax system, if the seller pays import VAT at the time of import, the seller can claim credit for the import VAT invoices in the sales tax return. Based on item 2.B, that is, after the new tax reform, the duty of the tax agent will be to declare import VAT for the seller as well as the refund of other input VAT invoices.
06
tax rate
As a result of the transfer of the tax liability to Flat, VAT on sales will no longer be applicable to the UK Flat low rate regime as the amount withheld and paid by Flat will be presented as 20%.
07
European Company Registration
If your company is outside the UK and located in Europe, from January 1, 2021, the UK will remove the remote sales limit; European companies with remote sales in the UK will also be required to register a UK VAT.
In summary, it is good to know that with the introduction of withholding VAT in the UK, our UK tax agent will still need to file returns for the seller, as well as credits and refunds, and in accordance with the pass-through principle of the tax liability to the sales platform. In our opinion, platform sellers will no longer be eligible to use the UK's low Flat VAT system.
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