Overview

On July 1 2021 the European Union introduced a sweeping reform of its value‑added tax (VAT) rules for cross‑border e‑commerce, and the United Kingdom followed with its own post‑Brexit updates. The reforms removed historic distance‑selling limits, require VAT to be charged at the moment of purchase, and impose new registration duties for inventory stored in Amazon fulfillment centers. Sellers who fail to adapt risk hefty fines, account suspensions, or removal from Amazon’s European marketplaces, making swift compliance essential.

Key Points

• Distance‑selling threshold eliminated — The EU’s €10,000 ceiling disappeared, so every sale to an EU consumer now triggers VAT collection at the buyer’s local rate.
• One‑Stop Shop (OSS) introduced — Sellers can submit a single quarterly VAT return for all EU sales through the OSS portal, streamlining multi‑country reporting.
• Import One‑Stop Shop (IOSS) for parcels ≤ €150 — Low‑value shipments must have VAT paid at checkout via IOSS, removing the need for separate customs paperwork.
• Amazon acts as marketplace facilitator — Amazon automatically calculates, collects, and remits VAT for many EU and UK transactions, but sellers must supply correct tax identifiers.
• UK VAT registration mandatory for Amazon‑stored stock — Post‑Brexit, any merchant using Amazon’s UK fulfillment network must register for UK VAT regardless of sales volume.
• Severe penalties for non‑compliance — Tax authorities may levy fines up to 100 % of the VAT owed, and Amazon can suspend listings that lack proper VAT documentation.

How the New VAT System Works

1. Determine the applicable tax at checkout — When a French buyer orders a product priced in USD, the seller converts the amount to euros and applies France’s 20 % VAT rate before the order is finalized.
2. Enroll in the correct scheme — A U.S. seller with customers in Germany, Italy and Spain registers for the EU OSS, files one quarterly return, and pays the aggregated VAT to a single EU tax authority.