Anyone in the UK? How does VAT work for Amazon purchases?

[fuzzybabybunny]

I want to order a smartphone from Amazon.de and get it delivered to London. The smartphone is brand new and coming from Germany, but when I go through the order checkout process there's no 20% VAT added. The grand total is simply the item price and the shipping cost added together. I'm purchasing it from a smaller seller though, not Amazon itself.

When does the 20% VAT get added / charged / paid, if any?

 

[WelshBloke]

The grand total is simply the item price and the shipping cost added together.

That's how it works. The price on the sticker is the price you pay at the till.

I think that you can get the VAT refunded if you are outside the EU but it's pretty complicated.

https://eu.usatoday.com/story/travel/destinations/2014/06/19/europe-shopping-vat-refund/10751983/

Edit: just noticed that you are talking about Germany to London (I've not had my coffee yet!). You don't have to do anything, you just pay the sticker price, that's one of the points of the EU.

 

[dave_the_nerd]

I'm in the US but when I order stuff from Catalonia (don't call it Spain!) they take the VAT off the price.

 

[rumpleforeskin]

The German equvilent of VAT is MwSt and is 19% and already included in the price. You pay no further import charges buying goods in the EU... Well except maybe a bit more postage.

 

[fuzzybabybunny]

Is it common for small sellers on Amazon to just not charge VAT? Same as smaller sellers in the USA who do not charge sales tax even though they technically should?

 

[Mark R]

There are minimum limits for a seller to charge VAT. If a seller's total business turnover is below a certain level, then they do not need to charge VAT (and in fact, to reduce admin for the tax authorities, the tax authorities often say that small sellers are not allowed to charge VAT).

If a seller expects their total sales to exceed their country's threshold (usually around €100k) in a year, then they are required to charge VAT.

 

[fuzzybabybunny]

There are minimum limits for a seller to charge VAT. If a seller's total business turnover is below a certain level, then they do not need to charge VAT (and in fact, to reduce admin for the tax authorities, the tax authorities often say that small sellers are not allowed to charge VAT).

If a seller expects their total sales to exceed their country's threshold (usually around €100k) in a year, then they are required to charge VAT.

Wow, so doesn't this give a small seller a pretty big price advantage compared to a large seller? A small seller doing less than $100k can charge 500 euros for something while a huge seller has to charge, say, 600 euros for the same thing.

 

[Mark R]

Yes. You are right, to a point. You do occasionally see some fiddling like this going on - if you check adverts for businesses for sale, you see a suspicious number for sale with annual sales just a sliver below the VAT threshold.

However, the advantge isn't quite as big as you might think all the time. The smaller seller who can't charge VAT, also can't reclaim VAT on their purchases.

Let's say I have a business making widgets. I buy €50 of parts to make a €166.67 widget.

If I am VAT registered, I pay the seller €60 (€50 for the parts, and €10 for VAT @ 20%). I sell the widget for €200 (€166.67 for the widget, and €33.33 of VAT). I pay €23.33 VAT to the tax man (€33.33 which I collected less the €10 I paid out).

if I am not VAT registered, I pay €60 (€50 for the parts and €10 for VAT). I sell the widget for €200 (no VAT charged). The tax man loses out of €23.33, which I keep as profit.

If I am selling direct to consumers, then a small business is able to undercut this way. Just how much they can undercut depends on how much VAT they need to pay. A box shifter, buying gismos in €100, and selling them for €120, only saves VAT on €20.

However, if I am selling B2B, then if I can't charge VAT, my customer can't deduct the VAT. So, in my first example, my VAT registered business only pays €50 for the widget parts (Although the invoice is €60, I get a €10 credit on my own VAT bill). Similarly, if a VAT registered business buys my widget, they get a VAT credit, so only actually pay €166.67.

If I am not VAT registered, a VAT registered buyer cannot get a VAT credit, so pays €200 for my widget.

 

[Newbian]

Wow, so doesn't this give a small seller a pretty big price advantage compared to a large seller? A small seller doing less than $100k can charge 500 euros for something while a huge seller has to charge, say, 600 euros for the same thing.

Well big sellers can buy / make their products in bulk and that helps a lot to keep their prices low.