VAT refund for non-EU marketplace sellers
The issue with VAT refund may appear when non-EU companies import goods to the EU and sell them via Marketplace. It comes about as an effect of two circumstances: first, the marketplace collects and remits all VAT collected from buyers, and second the company as an importer pays VAT at customs.
I must say right away that the return of VAT in Europe is a long procedure associated with checks and waiting. Sometimes such an expectation reaches 4 and a half years, for example in Italy.
I will give you an example: an Indian company using the Amazon FBA warehouse in Germany imported goods from India and paid at customs clearance 2000 euro in November 2021. It sold goods via Amazon. Amazon as a marketplace is remit VAT collected on these sales and sends it to tax authorities – such tax obligations are mandatory: marketplace must collect VAT for sales of non-EU merchants. At the beginning of December Indian company submits a German VAT return with a negative amount. But it may claim VAT only when the 2021 year ends after submitting a yearly VAT return.
Such a situation looks very disadvantageous because may lead to a shortage of working capital.
I will give you 3 options on how to avoid such a problem of VAT refund.
Use a French warehouse to import goods. France has a rule that all importers may deem VAT payment without any bureaucracy or deposit. Each company importing goods to France needs to report and pay import VAT in VAT return in month text to the month of import. For marketplace sellers that means that imported VAT reported might be credited in the same tax return. In practice, it means that VAT due is zero and working capital is safe.
A seller might open a company in European Union. In such a situation Marketplace is not withholding any VAT from a seller as soon as Marketplace hasn’t got an obligation to remit VAT for EU business. In such a situation Seller receives collected VAT from Amazon and reports as usual outgoing and incoming VAT in its’ VAT return. Often such a case doesn’t cause a VAT refund and is associated with this audit.
Import via custom procedure number 42.
Customs procedure 42 is a method when imported from outside the EU into a Member State and will be transported to another EU country. For example, Customs clearance is done in Denmark, and goods are transported to a warehouse in Germany. In such cases, the VAT is due in the latter – the country of destination. An importer can use custom procedure 42 to obtain a VAT exemption. This case is similar to option one and mean that marketplace seller can report import VAT in VAT return and credit this reported VAT at the same time.
We fully understand that working capital is a very important issue for the majority of marketplace sellers and are happy to advise in your specific case. We also can help to refund VAT paid at customs.