How to pay 0% VAT on Amazon orders within the European Union. (EU Reverse Charge Mechanism)

For legal reasons this post does not constitute tax advice.

One pro-business benefit of the European Union is the ability for cross-border transactions to be taxed at 0% at the point of purchase and then correctly taxed later in the accounting process. This is known as the EU Reverse Charge Mechanism.

This is an important bureaucratic right you should exercise because it can be a real pain to request a VAT refund any particular EU country. So it is better to not pay the VAT to the ‘wrong' country in the first place and have your products sold at 0%.

First of all you need an Amazon Business account. You can sign up to any of the locales near you. UK, Germany, France, Italy, Spain. (Amazon just extended a 50% discount on your first order if you sign up using these links. See also this article I wrote which explains the promotion.)

Note that there is a checking process in the sign up which can take a day or two, but you are allowed to register as a private individual sole trader or a limited liability company. You do not need a VAT number to sign up but in order to get 0% VAT invoices you must have it entered and verified by the time you order. Verification is instant as it runs the same algorithm as the one on the European Commission's website.

How it works

0% VAT invoices are issued under the EU Reverse Charge Mechanism which means you can buy online from any EU country and have them delivered to you. You then add VAT back in the country of your business registration during your normal accounting procedures, which for most ends up in a deduction in your VAT bill.

A important things to note:

  • You need to provide your VAT number at the time of sale
  • Sales must be done on a business-to-business basis
  • The country that issues your VAT number AND the country of delivery must be different to the Amazon website you use. (The VAT and delivery countries may be the same.)

Examples

Even though my examples below use Amazon Spain, the same principle applies to any of the Amazon EU sites.

Buying from Amazon Spain using an Estonian VAT number and delivery to Portugal

This is a common usage for those who wish to use Estonian e-Residency but the same applies to anyone with an EU business. Since you are buying from Spain and neither the VAT number nor the delivery address is Spanish, then your purchase is invoiced using 0% VAT and you apply EU Reverse Charge Mechanism.

Amazon.es – non Spanish VAT and delivery address. “Impuestos” means taxes

 

Buying from Amazon Spain using a Spanish VAT number and delivery to Portugal

Even though your delivery address is not Spanish, your VAT number is. Therefore your order will have 21% VAT paid to the Spanish authorities.

Amazon ES – Spanish VAT number

 

Buying from Amazon Spain using an Estonian VAT number and delivery to Spain

Like above, because at least one component of your VAT or delivery address is Spanish then you will be billed the local VAT rate rather 0%.

 

I already have an Amazon in my country. Can I still use EU Reverse Charge Mechanism?

Yes! The issue you may have if you are exercising your right to register your company in another EU country but work in another, is one of your VAT number or delivery address will probably trigger the ‘wrong' VAT rate.

Therefore you should use a different Amazon country's website to make the purchase. You will need to weigh up any delivery costs with any other savings you can make.

Bottom Line

It is an EU right of all citizens and businesses to purchase anything from any other part of the Union. There are set processes and protections in place to facilitate this, and the Reverse Charge Mechanism should be seen to cut out bureaucratic steps which is well within the spirit of how the European Union aims to function.

About Tim

Tim Lai is a Chartered Engineer and a typical nerd who analyses every travel deal, travel hack and is one of the world's leading travel experts. He has travelled to around 90 countries and also speaks Spanish, Portuguese and Mandarin. He has been featured on the likes of CNN, BBC and also broader websites websites like Nomad Capitalist for his deep knowledge of EU travel laws. An accredited journalist, he is happy to speak to other journalists who need expertise on travel topics.

More articles by Tim »

Pingbacks

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.