A2X VAT settings from 01.08.2024

Amazon has recently announced changes in the VAT treatment of fees that will significantly impact UK sellers. Here is the update:

Effective August 1, 2024, Selling on Amazon, Fulfilment by Amazon, and all other services currently supplied by Amazon Services Europe S.à r.l. (ASE) will be supplied by Amazon EU S.à r.l. (AEU). All agreements, policies, terms and conditions currently referring to ASE, including Amazon Payments agreements, will be updated to AEU. Additionally, all invoices issued by Amazon will be issued by AEU instead of ASE after August 1, 2024.

If your company is established in the UK, Germany, France, Italy, Spain, Netherlands, Poland, Belgium or Sweden, you will be invoiced by the AEU branch in your country of establishment. As a result, local VAT rules apply, and VAT will be charged on your Amazon fees. In the majority of cases, we expect that you will be able to recover this VAT through your normal VAT return process.

What are the changes?

Previously, UK VAT-registered sellers paid VAT only on UK advertising fees billed from London, with other fees billed from Luxembourg under the Reverse Charge Mechanism. Now, Amazon will bill all fees from within the UK, meaning sellers will be charged VAT directly and need to reclaim it on their VAT returns.

This change affects FBA fees, merchant seller fees, and subscription fees, requiring sellers to adjust their cost considerations, cash flow management, and VAT reporting according to HMRC regulations.

What do I need to do?

You will need to update your tax mappings on the impacted transactions. Here is a guide showing the impacted transactions, their current tax rate mapping and what their new tax rate might be from 1 August 2024.

Transaction group	Tax rate mapping prior to 1 August 2024	Tax rate mapping from 1 August 2024
FBA Fees	20% reverse charge	20% Standard expense tax rate
Merchant Seller Fees	20% reverse charge	20% Standard expense tax rate
Subscription Fees	20% reverse charge	20% Standard expense tax rate
Amazon Shipping fees (with the exception of 3rd party shipping providers)	20% reverse charge	20% Standard expense tax rate

What do I need to do for settlements before 1 August 2024?

Settlements before 1 August 2024 should be posted as normal. You will only need to update your mappings for data after 1 August.

What do I need to do for settlements after 1 August 2024?

Before posting settlements from 1 August onwards, you will need to update your tax mappings to the new rate. Settlements can then be posted; refreshing not necessary.

How to manage split settlements that cover August and September?

For settlements that include an August and September portion, for example if the Settlement covers 23 July to 13 August, there are a few extra steps you will need to take to ensure your data is accurately posted for each period:

Step 1: Before changing mappings, post all settlements prior to 1 August, including the entry that covers 1 August.

Step 2: Log into your accounting software and find the invoices you’ve just posted.

Step 3: Delete just the August invoice from your accounting software.

Step 4: In A2X, update your mappings for the applicable transactions

Step 5: Repost the settlements which covers 1 August

Step 6. Back in your accounting software, this time you will delete the invoice/journal for the period prior to 1 August.

What about future settlements?

Going forward, with your new mappings you won’t need to delete entries. All future invoices posted to your accounting software after 1 August will have the new mappings applied.

Assisted setup

As of 1 August, Assisted setup will apply a 20% VAT-inclusive tax mapping for applicable fees. If you use assisted setup, you can click “reset” on the mappings page in order to update mappings for entries you want to post 1 August onward.

We’re here to help

If you have any questions or would like assistance, the A2X support team is always happy to help. If you would like additional assistance, they are also offering one-off support calls to review your new VAT mappings with you.

Please speak to the Central Team if you have any further questions.