Global Tax Compliance: The Necessary Low-Down

[00:00:00] Hello and welcome to eCom Insights, the podcast where we give you data-led tips to optimize your profits online.

[00:00:12] Hello and welcome back to eCom Insights with me, Rayl.

[00:00:15] I'm me Matt.

[00:00:16] So in this episode we are joined by one of our newest partners, Taxurely.

[00:00:20] So when one thinks of tax and compliance and VAT and all those sort of things, they're typically quite technical yet very important topics.

[00:00:28] And I certainly do not pretend to know much about this particular area, particularly with eCommerce.

[00:00:33] Matt probably knows a bit more than me, but certainly not an expert either.

[00:00:37] So that's why we've invited Tommy Hengvest, Business Development and Partnership Manager at Taxurely.

[00:00:42] Welcome to the show, Tommy.

[00:00:44] Hi, Rayl.

[00:00:45] Hi, Matt.

[00:00:45] Thank you very much for having me on this morning.

[00:00:48] Really looking forward to taking a deeper dive into some...

[00:00:52] Let's try and keep them interesting tax boards, shall we?

[00:00:56] Indeed.

[00:00:57] So you started your eCommerce journey globally, eCommerce experts.

[00:01:00] Obviously our paths crossed there.

[00:01:02] So yeah, just tell us a bit about your journey there, Tommy, and how it all mapped out for you.

[00:01:08] Yeah, so yeah, I started, I think around four or five years ago now working at company yet called Global eCommerce experts.

[00:01:18] I was previously always kind of in sales based positions before then.

[00:01:23] And an opportunity came up at a local, well, yeah, free PL fulfillment center,

[00:01:30] which I was looking for work at the time and a good friend of mine, Tom,

[00:01:34] who I now work with at Taxurely had a sort of relationship with them and knew the owners there

[00:01:38] and said it would be a really good position to go for.

[00:01:41] So yeah, started working there as like a European success manager.

[00:01:46] So what they did was they offered like a full end-to-end expansion like service,

[00:01:51] where so you get the AT registered, you make sure your products are compliant,

[00:01:55] do the translations, then you look into logistic fulfillment account management.

[00:02:00] So really good place to learn about eCommerce, all the kind of turning cogs off the ecosystem.

[00:02:08] And yeah, I was there for 18 months and then I started managing the partnerships at Global eCommerce experts as well.

[00:02:15] So speaking to other businesses within the industry, Matt and I did previously do a podcast as well there.

[00:02:22] So yeah, you might be seeing me twice on the channel now.

[00:02:27] And yeah, great experience, couldn't really complain about what I was learning there.

[00:02:33] And then yeah, over time, I always kind of knew the team at Taxurely

[00:02:39] and then kind of came together, used to see each other at events and that kind of thing.

[00:02:44] And then eventually I think Tom managed to twist my arm enough

[00:02:48] and turn me over to the dark side, which is the world of tax.

[00:02:52] Tax and VAT? Yeah, I mean you mentioned that whole sort of turning cogs of the eCommerce ecosystem.

[00:02:58] It's vast isn't it in the world of digital.

[00:03:00] What led you to the world of tax and VAT out of all of that?

[00:03:04] So yeah, it was absolutely 100% right Matt.

[00:03:08] As you guys know being in the space as well, there's constantly different changes that are being made,

[00:03:14] whether it's Amazon related, whether it's solely VAT or tax related.

[00:03:18] So there was always lots to keep up on the opportunity with tax.

[00:03:23] I mean listen, I didn't ever sit there 10 years ago.

[00:03:26] I think like 10 years I want to work in VAT and tax.

[00:03:28] I'll tell you that I'm pretty good about that.

[00:03:31] But what excited me about VAT and well really what excited me was the company Taxurely.

[00:03:38] So the kind of growth that they were seeing in the space,

[00:03:43] obviously coming into kind of a role where you're working still in partnerships and business development.

[00:03:48] So I always loved speaking to people about their businesses, how they started,

[00:03:52] how they got going, etc. What they're doing well or hasn't worked so well.

[00:03:55] So I still had that kind of that piece of the job as well.

[00:03:59] Yeah, I mean we made a joke there about sort of VAT and tax and what have you but I mean it is super important.

[00:04:07] One thing you don't want to do is annoy your friends that are customs and exercise and get things wrong.

[00:04:13] So I think there's some common misconceptions.

[00:04:16] If you're selling on Shopify or any DTC site like you said,

[00:04:19] and I'm selling through Amazon for example,

[00:04:23] what the difference is between VAT and tax

[00:04:26] and should I assume that oh Amazon's just dealing with all the VAT

[00:04:29] or is it something I should be looking at closely

[00:04:32] or you know yeah, just through it just so anyone that's going on the journey

[00:04:37] doesn't get caught out with a nasty letter.

[00:04:39] Absolutely Matt, you're 100% right.

[00:04:41] You need to make sure just because you're set up for one way in Amazon

[00:04:44] and then you look to launch potentially like a DTC channel in Europe etc.

[00:04:49] You need to make sure you're doing your due diligence before you launch

[00:04:52] and working out that you're set up from the right tax perspective.

[00:04:56] Otherwise you could start selling in a region for three to six months.

[00:04:59] You found out you're non-compliant from a tax perspective

[00:05:02] and you can be deregistered, you can have big fines etc.

[00:05:06] So one of the first things is always do your research,

[00:05:09] always speak to an expert on that level.

[00:05:11] When it comes to like selling on different channels

[00:05:15] it's all yeah depends on how the goods are being fulfilled,

[00:05:18] where the goods are going to etc.

[00:05:20] So as an example with Amazon if you're an FBA seller

[00:05:24] wherever your goods are positioned within the FBA

[00:05:27] you would need to be locally that registered within that region.

[00:05:31] So that's pretty straightforward.

[00:05:33] If you're panning you, there's X amount of countries in Europe

[00:05:35] if you're in the UK, the Netherlands and Sweden

[00:05:38] and they're launching now I believe as well.

[00:05:40] So you just need to make sure you're locally VAT registered from that perspective

[00:05:43] wherever the goods are stored from an FBA.

[00:05:46] When it comes to essentially your own channel like Shopify

[00:05:50] or a WooCommerce store anything like that

[00:05:52] what you would need to do is you would need to be locally VAT registered

[00:05:56] wherever your goods are held and then depending where the movement of your goods is going

[00:06:01] you may need additional like VAT registrations, VAT numbers

[00:06:06] to assist with your selling.

[00:06:08] So as an example if you're a UK seller who wants to ship goods into the EU

[00:06:12] it's recommended to use something called IOSS

[00:06:14] which allows your goods to be imported into Europe

[00:06:17] and then you have one filing rather than be

[00:06:20] um, cut to file in every individual region

[00:06:23] or as an example if you're positioning your goods in the EU

[00:06:26] lots of people we see these days are storing their goods in places like the Netherlands, Germany

[00:06:31] in that instance you might need to be OSS registered

[00:06:34] which gives you access to the rest of the free market in the EU

[00:06:37] and not be liable for individual VAT filings.

[00:06:41] So yeah there is certain things that you need to make sure you're set up on from that perspective before you launch.

[00:06:47] So the question for me which is how much if anything

[00:06:51] does Amazon help you with this process or any of those sort of platforms

[00:06:55] or yeah is it just sort of you better off seeking independent advice for most people?

[00:07:00] Amazon will assist you with all of this kind of VAT piece

[00:07:04] so they have a program called Amazon VAT Services

[00:07:07] which we're one of the agencies who assist with partnering and servicing that kind of section

[00:07:13] so that is a very basic service

[00:07:17] you're still dealing with seller central from any communication level

[00:07:20] you can only track Amazon sales, the pricing structure

[00:07:25] and the fees is based kind of pulling your fees out of Amazon

[00:07:28] if you're selling outside of Amazon or you're looking at other regions

[00:07:32] it's not really recommended to utilize Amazon VAT Services

[00:07:35] or even if you're unsure about your VAT

[00:07:38] and there's something you'd have a few questions around

[00:07:41] it's very hard to deal with seller central and communicate

[00:07:45] and have a point of contact with Amazon as I'm sure everyone listening knows

[00:07:49] and you both know from being in the industry

[00:07:52] so yeah there are obviously tax providers and services in the space

[00:07:58] as well as ourselves who can deal with you on kind of like a more to one to one level

[00:08:04] so you can have like an manager, you'd have a customer care rep

[00:08:08] built into our dashboard is a monitored chat box 24-7

[00:08:12] where so if you ever have any immediate questions or need assistance

[00:08:15] you can get that just that extra level of care and nurturing

[00:08:19] which when it comes to VAT and when there's technical questions around

[00:08:23] and as you say you'll maybe uncertainties around filings or declarations

[00:08:27] you'd rather be sure than to be guessing etc

[00:08:30] so in that instance it's often worth yeah

[00:08:33] utilizing an agent someone who's after you from a VAT and a tax perspective

[00:08:38] well no doubt get on to the B word shortly

[00:08:41] but I am conscious that we do you know we mainly this podcast is

[00:08:44] it's currently mainly focused on the UK and EU

[00:08:48] but obviously a lot of our listeners and clients are based in the US

[00:08:54] and I guess there's sort of similarities of

[00:08:57] in the states you have different sort of tax VAT or sales tax rates

[00:09:02] don't you in different states and I guess if you're looking over in the EU

[00:09:06] as a United States of Europe has something similar but

[00:09:10] what's the sort of you know how can we help some of our friends

[00:09:14] across the pond if they're coming into the EU

[00:09:17] just go into it wide eyes wide open and not get caught up on any of the

[00:09:20] the sort of tax hurdles and issues or you know

[00:09:24] give me a head so yeah but yes for just a comparison contrast

[00:09:27] because I guess there's similarities but not all is the same yeah

[00:09:32] it's a great point you make there Matt and obviously from a US perspective

[00:09:36] yes often you would need state sales tax registrations

[00:09:40] which can be very quick and easy to do so I'd say the main

[00:09:43] consideration when you're launching into Europe is to look at like

[00:09:47] your kind of forecast when you want to launch and look at like kind of deadlines

[00:09:51] because in the EU at the moment for businesses

[00:09:55] based in the EU or bait based outside of the EU

[00:09:59] there are some very specific regions that are taking quite a long

[00:10:03] time to register for VAT like Spain I think it's what one

[00:10:07] I had issues with recently. Spain you have to do certain things like

[00:10:11] get your documents or postiles so you have to send them off to a physical tax office

[00:10:14] and sign them yourself so that can be obviously a more complicated

[00:10:17] like service and to take longer than you would expect

[00:10:21] but there's regions like Germany and UK where it can take two free

[00:10:26] four months to register for VAT and obviously yeah it's

[00:10:31] being wary that you need to have VAT numbers and registrations

[00:10:35] in individual regions rather than just oh can I not just get one

[00:10:39] EU number but that doesn't mean the opportunity is not there

[00:10:42] I think if you're an established US seller the best next place you can go is the

[00:10:47] EU I think if you look to the whole of the EU market from an Amazon perspective

[00:10:50] and you're fully optimised in all of it you'd be at around 80 to 90%

[00:10:55] of your US Amazon sales obviously we know US is a kind of

[00:11:00] gigantic monster in the e-commerce game

[00:11:03] but yeah if you're fully optimised in Europe you could be looking to do around 80 to 90%

[00:11:07] obviously that's just a standard figure some products would do better some products

[00:11:10] would do worse but time frames is the main thing people when launching

[00:11:15] in Europe would automatically look okay I need to now process a shipment

[00:11:18] my shipment's going to take me a month or three weeks to get there and it's

[00:11:22] sometimes you just be like hold on hold on we need to make sure your setup

[00:11:26] or a VAT perspective is your product compliant to sell these

[00:11:30] are the kind of questions that you need to be asking before you think about launching into the US

[00:11:34] so you can map out okay my UK looks like it's going

[00:11:38] to be ready for Q4 let's start looking at our shipments in October

[00:11:42] November let's hold off on that for the meantime have we done our translations

[00:11:46] those are the kind of things you need to be asking yourself before you launch

[00:11:50] in there in Europe and always speak to an expert as you say

[00:11:54] all of the companies like ourselves and yourselves as well

[00:11:58] optimise on will always speak to you and consult you before

[00:12:01] going through any technical issues so this is what you need to do these are the time frames

[00:12:06] these are the processes and then the business can make the decision from themselves

[00:12:10] whether they think it's the right time, whether they want to wait etc

[00:12:12] do the again just keeping it very simplistic because I'm pretty much in UB to this area

[00:12:19] every day is a learning day

[00:12:22] are the rates different like within the EU

[00:12:25] across different countries or the thresholds different like I mean how much

[00:12:28] if I'm thinking about

[00:12:32] selling in the EU I'm modelling out all these different

[00:12:36] rates and thresholds and everything else as well

[00:12:38] yeah absolutely so there are different VAT rates across Europe

[00:12:44] potentially not as sometimes complicated as the US because US have

[00:12:48] different state sales tax per region and then other corporation taxes in certain

[00:12:52] regions which are always fluctuating so Europe has basically

[00:12:56] they have like a set VAT rate per country these kind of

[00:13:00] may change every couple years but generally they stay around the same

[00:13:04] mark and kind of I'd say average speaking they range

[00:13:08] between around 19 to 23%

[00:13:11] I think that I always kind of when speaking with businesses and brands it's always

[00:13:16] kind of letting them know that obviously when launching in Europe

[00:13:20] these are the kind of VAT rates just make sure in your final

[00:13:24] sale price that you're accumulating for at the end of the quarter you're going to be expecting

[00:13:28] to round to pay around the 22% mark in VAT to the local

[00:13:32] tax office so yeah that's something

[00:13:36] we're accumulating for obviously you can look at individual regions

[00:13:39] you can set up your pricing from your Shopify store or your Amazon store to be

[00:13:44] exactly at 19% over 23% over that kind of thing

[00:13:48] but generally speaking I always say around the 22% mark you should account for

[00:13:52] that you'll be paying to the tax office at the end of the quarter or at the end of the month

[00:13:57] so what do you reckon guys are we going to go there and mention the B word

[00:14:02] and Brexit and how this has made things so much easier for us across Europe

[00:14:06] and just what I guess

[00:14:10] I mean I guess then let's just take the politics to one side but it is important

[00:14:14] in this context of this discussion you know what's changed and

[00:14:17] what do we need to be aware of in respect to Brexit

[00:14:22] absolutely it's something that I think nobody likes to talk about

[00:14:26] today Matt and also at the same time I think when people talk about Brexit

[00:14:29] half the people and myself being one of them nobody even really truly understands

[00:14:34] what it still means but

[00:14:36] yeah from a VAT and a tax perspective it definitely

[00:14:40] did make some changes in between the trade and the movement of goods

[00:14:44] between the EU and the UK

[00:14:48] so as an example you used to be able to have kind of have free movement of goods

[00:14:53] between the UK and the EU I believe the UK used to be on the PAN EU

[00:14:57] programme etc so now there's a few different things that you would need to set up

[00:15:02] before you're looking to launch in the UK

[00:15:05] and the EU so one of the main things is you need to

[00:15:09] now separately have a different EORI number so an economic

[00:15:13] operation registration identification number

[00:15:16] well nicely done good of a mouthful there that basically what that number

[00:15:21] is it's a number that accompanies your goods when they're clearing through customs

[00:15:24] to show that you're a registered economic operator within that region

[00:15:28] so previously you used to have an EU EORI number where at any point

[00:15:33] if you wanted to ship your goods into an EU country you would need to have a VAT registration

[00:15:36] and you'd have an EU EORI number and your goods would get cleared through customs

[00:15:41] now you need to have a separate so you need to have a UK EORI number

[00:15:44] and you would need to have an EU EORI number EU still obviously is

[00:15:49] active for the whole of the EU market but we need our separate one now

[00:15:53] and then yeah it's other services like the one I mentioned earlier so

[00:15:56] IOSS previously you just be able to send goods freely between

[00:16:00] obviously UK and the EU with ease of movement of goods through shipments

[00:16:06] now probably you'd say they're a bit more rigorous with their checks

[00:16:10] with goods cup crossing between the channel IOSS and other services

[00:16:15] can help with this and yeah just making sure that if

[00:16:18] you're selling from the EU into the UK there's now

[00:16:22] you can sell goods direct to consumer but there's a belief in about

[00:16:26] 75k is a distance selling threshold so after you

[00:16:30] breach that kind of threshold you would then need to get locally VAT registered

[00:16:34] in the UK even if you're not storing goods there whereas before

[00:16:38] you could utilize like OSS or something like that

[00:16:41] so yeah just a few things obviously the opportunity is still there

[00:16:46] the Germany and UK are seen as the biggest European markets when it comes to

[00:16:50] Amazon and e-commerce as an industry so

[00:16:53] if you're looking to establish yourself in Europe is worth doing

[00:16:58] the cost of whether it's registering for VAT or a few extra shipments

[00:17:02] isn't huge compared to like the opportunity that you could

[00:17:06] potentially be missing out on so yeah I'd still say that the opportunity

[00:17:10] in the markets are massive like from an e-commerce perspective just

[00:17:13] a few extra levels of red tape administration that you would need to go through

[00:17:17] before you're kind of setting in their regions yeah Germany is larger than the UK

[00:17:22] isn't it from an e-commerce perspective for our friends across the pond

[00:17:25] and obviously the economic powerhouse of the EU

[00:17:29] very high net worth, a lot of high net worth individuals good quality

[00:17:33] products so well there so I mean don't lose sight of that

[00:17:37] I guess is one I'd watch out I mean I guess I'm just I'm sitting

[00:17:42] somewhere in California in my head as an Amazon seller listening

[00:17:46] to us going oh my god this sounds really complicated in the EU

[00:17:49] with all the tax pieces should I be doing it and I said would say just

[00:17:53] call out there's a few things to bear in mind from a strategic point of view

[00:17:57] one these barriers of entry mean that potentially this markets in the

[00:18:01] EU that are less competitive than the states for example and if you

[00:18:05] can go through all these loopholes as it were and get all set up and fully

[00:18:09] optimised it's a lot harder to knock you off the top purchase sort of like

[00:18:13] the largest seller in the EU than it is in the US because

[00:18:16] it's a one market it's super competitive over the states you could be

[00:18:20] well established now but competitors can come in and challenge that

[00:18:24] a lot quicker than the states in my experience so you know it's

[00:18:28] if there's a barrier to entry there's an opportunity I guess it's just wanting to make that point

[00:18:33] yeah it's a lot more saturated the US there's a lot more as you say price

[00:18:36] cutters then people coming in that are kind of trying to

[00:18:39] you etc and in Europe you still get the ease of movement of goods

[00:18:44] the Amazon FBA Pali EU program is fully working it's very easy to use once you're

[00:18:50] set up from a VAT and a tax perspective you're sending goods to one location

[00:18:54] and then you'll get an access to six markets which as you say Matt

[00:18:58] if you look at your Italy, your France, your Spain how many people do you think are selling

[00:19:02] in there everyone's got reasonable buying trends etc so yeah the

[00:19:06] opportunity is massive in Europe. Going back to the

[00:19:09] to the Brexit one just do you have any numbers around

[00:19:13] increased cost of compliance I mean like it's you know you're outlining the process here but is it

[00:19:17] you know sounds worse than it is in terms of like actual

[00:19:20] money spent or time spent and things like that. In terms of money

[00:19:25] spent per year for you to be obviously logistics is something which

[00:19:30] you would be processing from a company anyway but from a VAT and

[00:19:33] tax perspective it would cost you less than a thousand euros a year

[00:19:37] would be in that region which pretty much a rounding error for most

[00:19:41] as you say the size of the market that you have

[00:19:45] access to and the other pieces that Matt just mentioned kind of

[00:19:49] the competitiveness of the space and the price points

[00:19:52] a thousand euros isn't a huge amount of money and yeah that's

[00:19:56] set up and upkeep and everything like that you'd probably be looking at more like

[00:20:01] 800, 700 euros a year mark for just a year

[00:20:05] of a year basis to be set up in the UK so not a huge cost

[00:20:08] in the perspective of things and do you need to be a when you register

[00:20:13] for VAT in each one of these individual countries do you need to also register

[00:20:16] like a local entity like a registered company or is it like you don't you know

[00:20:20] just walk me through that if you don't mind. Yeah so that's a question that I get asked a lot

[00:20:25] from especially US businesses or businesses based outside of Europe

[00:20:29] who are looking to launch in the space everyone thinks that

[00:20:33] you would need to set up a limited company or a GMBH or a BV

[00:20:36] company to be able to sell within the region and in all

[00:20:41] honesty there is no benefit of doing so

[00:20:45] as long as you're if you're an online seller so you're looking to sell

[00:20:48] e-commerce stores, Shopify, Amazon you want to trade potentially B2B as well

[00:20:53] out of a free PL or anything like that you really have no

[00:20:56] benefit of setting up a limited business because you'll then become liable for things

[00:21:00] like corporation taxings, pensions and just more liabilities as a business anyway

[00:21:05] as the only time that I'd say it's worth

[00:21:08] looking at opening up an entity in Europe as if you're looking to potentially

[00:21:13] open like a brick and mortar store or something like that

[00:21:16] you can manage B2B relationship, you can manage direct to consumer, you can operate in places

[00:21:20] like Amazon FBA just by getting VAT registered

[00:21:24] it's a lot cheaper to do so rather than managing the upkeep, hiring

[00:21:28] accounted to run your LTD etc and you get

[00:21:32] all that access to the markets from being VAT registered

[00:21:36] it almost just acts as like a plug-in or an add-on to where your business

[00:21:40] or your entity is based wherever it's an LLC and Australian business etc

[00:21:44] so that's a good answer

[00:21:47] I guess it's like any sort of current regulations

[00:21:52] and updates that we should be aware of at the moment just within

[00:21:56] the sort of tax space obviously you mentioned EU

[00:21:59] that's a big old area with lots of different countries and moving parts and legislation

[00:22:04] is there anything that you can see catching out sellers at the moment

[00:22:08] or brands on e-commerce?

[00:22:11] There have been a few shows like this which Amazon has introduced

[00:22:14] they offered something called like Call of Stock which didn't turn out to work very well

[00:22:19] there's obviously Eco Tax which is just kind of in the last couple of

[00:22:24] years come into space into the European space

[00:22:28] Eco Tax is a service

[00:22:32] so EPR is what it's called which stands for extended producer responsibility

[00:22:37] what that basically is

[00:22:39] it's launched in 3-4 countries at the moment so it's launched in Germany, France

[00:22:44] and Spain some of you Amazon sellers who are based in Europe

[00:22:48] may have been given notifications from Amazon in reference to this

[00:22:53] and basically what the EPR, the extended producer responsibility

[00:22:56] kind of legislation means is that if you're selling goods

[00:23:01] in Europe and your goods are packaging based

[00:23:05] or they've got batteries or their rubber or their electronical goods

[00:23:08] you as a seller have to take a certain level of responsibility

[00:23:12] of what happens to that product after it's either been discarded

[00:23:16] broken or thrown away so you have to register

[00:23:20] for in Germany it's called like a lucid number

[00:23:24] there's certain names across like Spain, Germany, France

[00:23:27] you have to register for an EPR so similar to BAT get an EPR certificate

[00:23:32] and then what you would have to do is make a contribution

[00:23:35] per year based on the level of waste that you are producing

[00:23:40] so as an example if you have one packaging

[00:23:44] and it's one piece of plastic packaging and it's got two batteries in it

[00:23:48] you would look how much does that weigh, how much packaging is there

[00:23:51] how many units have I sold across the year and then you would have to make

[00:23:55] a contribution to the local recycling office to say here you go

[00:23:59] here's 500 euros I've sold X amount of batteries and plastic in your region

[00:24:04] and then go from there and yeah you need to make sure

[00:24:08] as a seller that you're set up from that perspective

[00:24:11] that is live in Germany, France and Spain and I also believe it's just

[00:24:16] coming into play in the UK as well

[00:24:19] so normally Amazon is quite good it will notify you on that front

[00:24:23] if you do have a product which falls into a specific category

[00:24:26] France is a lot more in depth so they've got loads of different types of categories

[00:24:31] Germany and Spain are a little bit more basic but yeah just something

[00:24:35] to keep an eye on it is something that's actually offer we'll kind of

[00:24:39] go into more detail around pieces like that in the white paper we'll produce after this

[00:24:44] into the VAT sales tax all of that kind of thing

[00:24:47] something to keep an eye on as well is eco tax yeah and to be honest it's good for the environment

[00:24:52] so it's sort of a good thing I mean if you look at like the climate

[00:24:55] friendly program that Amazon have about reducing the amount of air and packaging

[00:24:59] and just generally doing the right thing for environment that's a good thing

[00:25:03] I mean it's a good thing consumers are searching out for products that are

[00:25:06] at least amount of plastic usage all those sort of good things

[00:25:11] there's nothing more that drives us nuts as consumers is when you have this huge

[00:25:15] enormous package and then this tiny little pack of batteries in them

[00:25:18] so I think it's just a good thing to avoid that tax but

[00:25:22] equally guys as FBA fees are going up

[00:25:27] anything you do to reduce packaging is going to potentially reduce your

[00:25:30] FBA cost as well so I think it's all good

[00:25:33] yeah from the manufacturers and the businesses who are selling these plastic heavy products

[00:25:38] to probably at the drawing board at the moment trying to work out how they

[00:25:42] can cut new corners of Matt's friends so

[00:25:45] yeah do the right thing rather than trying to avoid the tax I guess

[00:25:50] message there exactly is there for a reason yeah shifting

[00:25:54] the focus a bit to back to VAT but on the refund side

[00:25:58] in Europe so

[00:26:01] can you maybe walk me through the process is this something that brands

[00:26:07] ignore or not ignore but

[00:26:09] I guess don't take full advantage of what are the pitfalls there

[00:26:13] yeah you'd be surprised sometimes where I'll speak to a business

[00:26:17] or a brand and they'll talk about how they've been importing goods for

[00:26:21] a certain period of time into into Europe and they don't realize about like the

[00:26:25] refund like reclaiming or refunding any VAT

[00:26:29] so basically in Europe you have

[00:26:33] a local VAT rate and on some services you'll be expecting to

[00:26:37] pay VAT on so as an example like with some Amazon service fees which

[00:26:41] have VAT on them which are reclable or really one of the main points in terms

[00:26:45] of Europe is importing your goods which US it works a little bit different

[00:26:49] when importing your goods so say as an example you're looking to

[00:26:53] send your goods into Germany VAT rate

[00:26:57] 19% in Germany I'm pretty sure and say example

[00:27:01] you're looking to import 10,000 euros worth of goods into that region

[00:27:05] Germany will expect you to pay

[00:27:08] 1,900 euros as an importation VAT charge to clear them

[00:27:13] goods through customs that's of the cost value of the stock

[00:27:17] and then once you goods are imported so you've cleared them they're in Amazon

[00:27:21] say you've sold that 10,000 euros worth of stock

[00:27:25] you at your next filing are able to reclaim that

[00:27:29] back so yeah from cash flow it's great kind of service I believe

[00:27:33] they don't offer I'm not 100% sure but I don't believe they offer a service like this

[00:27:37] in the US where you can reclaim VAT obviously you have customs and duties but

[00:27:41] you can't reclaim them back obviously in Europe 20%

[00:27:45] it's quite high kind of percentage paying

[00:27:48] but just be wary from a cash flow perspective that is something you can reclaim back

[00:27:53] there are also other regions within Europe

[00:27:57] so UK has a thing called PVA post-batch accounting

[00:28:01] where so you almost defer the VAT the import VAT upon entry

[00:28:04] I was going to say that's one I've heard of yeah

[00:28:07] OfferLens has article 23 where you can offer a similar deferment

[00:28:11] of the VAT upon entry so for potentially your bigger brands and cash flow

[00:28:15] etc if you are importing 100,000 euros worth of stock who wants to be paying

[00:28:19] 20 grand in terms of just as a clearance fee so

[00:28:22] yeah there are methods and ways for European sellers to defer that

[00:28:27] and make sure their cash flow is still running well

[00:28:29] I would say just on the VAT side of things I think there was a while ago

[00:28:35] something like Carousel fraud or whatever people were shipping mobile phones

[00:28:39] in and out of Europe and trying to fiddle the books

[00:28:41] my point is that I'm not saying anyone listening to this podcast is going to be doing that sort of thing

[00:28:46] but the tax authorities do really look at your paperwork

[00:28:50] and if something's out of order you could you know

[00:28:52] they can come down very hard on you so make sure you've got your

[00:28:56] paperwork all in order if you're going to be doing that

[00:28:58] yeah absolutely people may be able to clear goods for a certain

[00:29:02] way in customs one way etc but it's the same as not being

[00:29:06] VAT registered and not making sure your products comply and so if you keep doing it over time

[00:29:10] you will get found out eventually so and when you do get found out your problems

[00:29:14] are going to be a lot worse than if you were just to set up in the right way

[00:29:17] you'll get blacklisted from a region you'll get huge fines

[00:29:20] it will create you a lot of headaches so always make sure you're set up in the right

[00:29:25] perspective before you launch don't try and like as you say like fun

[00:29:28] don't try and hack it or scrimp on the paperwork

[00:29:33] you'll always get found out so yeah good advice

[00:29:35] so Tommy let's take this beyond the EU and do a bit of a whistle-stop tour around

[00:29:40] around the world here so I guess pick a few countries where you see quite a lot of traction

[00:29:45] quite a lot of interest I think Australia comes to mind at least from

[00:29:48] Optimize on point of view we're seeing quite a lot of uptake there but just pick a few

[00:29:52] and go over what you know things to consider and how the regimes work there

[00:29:56] yeah absolutely it's another piece when obviously trading internationally

[00:30:01] you want to be making sure you're doing your due diligence and everywhere is set up differently

[00:30:06] so as an example from Australia everywhere since basically has a local tax law

[00:30:12] but it just guns under a different name so in Australia it's called GST which is goods and sales tax

[00:30:18] so as mentioned earlier to sell in Australia I believe you have a threshold of around

[00:30:23] I think it's between the 80 to 90 thousand dollar mark which you can store and sell goods in that region

[00:30:28] before being registered for GST once you have exceeded that threshold

[00:30:34] you would then need to register for that local tax registration

[00:30:38] so that's whether you're in an Amazon FBA or whether you're shipping and from a Shopify site etc

[00:30:45] and storing and facilitating your goods from that region

[00:30:49] so yeah keep an idea of the sales keep track how much you're selling and when you're selling it etc

[00:30:56] because once these thresholds are exceeded is your responsibility to register

[00:31:02] and start filing from a VAT and a tax perspective on that front

[00:31:07] another big one which I'm sure we'll have some listeners from is USA

[00:31:12] so USA is slightly different it's done on a state by state basis when it comes to state sales tax

[00:31:20] and they'll have something called a nexus threshold

[00:31:23] so when it comes to Amazon or Walmart which obviously the two biggest kind of marketplaces in the US

[00:31:31] Amazon and Walmart actually act as what's called like a marketplace facilitator for tax

[00:31:36] though previously there are lots of businesses and brands who are selling in US specifically through Amazon

[00:31:42] and they were registered in multiple regions when potentially actually they didn't need to

[00:31:48] because as you said Amazon is acting as that marketplace facilitator for tax or Walmart are as well

[00:31:55] so there's still worth doing your checks etc when selling on Amazon

[00:31:59] because you can breach for certain thresholds or you can trigger some of the nexus is when selling in their regions

[00:32:07] and basically what a nexus threshold is it's a value of goods or a number of transactions that you can sell into a certain state

[00:32:15] before you become tax liable so it might be $150,000 across a year that you could sell into that state before your tax liable

[00:32:23] or it's a number of transactions so you can make 200 transactions so 200 separate sales into a state

[00:32:30] before you come state sales tax liable within that region and if you're a Shopify seller

[00:32:37] you need to certably registered wherever your goods are stored to say a Texas warehouse

[00:32:42] you need to have a state sales tax in Texas and then what you need to be doing is just keeping an eye

[00:32:48] on all your individual figures and all your filings to make sure that okay I'm started to sell about $150,000 into California this year

[00:32:57] do I need to register to actually actually offer something called a nexus analysis where so we can take a deep dive into your figures

[00:33:07] and your sales and then we can actually check where maybe and we basically monitor it on a traffic life system

[00:33:13] so green means you're okay you're fully compliant in that state orange would mean that okay you'll start to approach the threshold

[00:33:21] this could be a good time to look into state sales tax registration and then if you're red it's not good you need to register as soon as possible

[00:33:31] someone's on the map

[00:33:32] someone knocking on your door

[00:33:34] exactly

[00:33:35] no RS

[00:33:36] I mean this sounds like quite a big burden right like I mean am I made to be logged like Amazon doesn't easily let's say

[00:33:43] give you a geographic breakdown of like you have no control of you know where people are buying from within the US

[00:33:48] I mean am I logging in every week to see like and trying to get a breakdown of states breakdown to see what's going where and what the thresholds are

[00:33:57] I mean that sounds like a pretty massive burden

[00:33:59] if it's only Amazon majority of the time you will be okay because as Amazon is acting as that marketplace facilitator for sales tax

[00:34:07] you have more risk as a company if you're opening up your own DTC channels

[00:34:12] yeah

[00:34:13] Shopify store or WooCommerce store or Wix store something like that

[00:34:16] that's where we see sellers are having more issues or going after back date or retroactively fire

[00:34:22] potentially receiving fines etc which obviously as we've said throughout this kind of program that nobody wants to deal with tax

[00:34:29] especially in kind of the past

[00:34:30] nobody's actually dealing with the present nobody likes thinking about the future but the worst thing you want to do is have to go back and sort out loads of VAT of violings and pay tax offices and pay fines etc

[00:34:41] so Amazon there is a small amount of risk but there is still a risk there so it's something you should still keep an eye on and kind of utilize an expert when it comes to your sales and your filings in Amazon

[00:34:52] but the real risk and where we see people kind of hook up etc is on the DTC side so your Shopify sellers your WooCommerce sellers etc

[00:35:03] they're the people that really should be keeping a bit better eye on their stores on their sales where their sales are going over what period of time etc

[00:35:11] and yeah we offer that as said that that's a free service a nexus analysis so

[00:35:16] nice

[00:35:17] and that'll give you complete clarity and confidence on where you're at what you need to do and how you should operate moving forward

[00:35:24] but your system or I mean all that complexity that Real alluded to your system will help automate that and just give you know the seller this is what you need to do

[00:35:33] this is what you're live or here's a bill to pay sort of thing and

[00:35:38] yeah we're clear

[00:35:39] all for yourself and as I said try to make it as clear as possible traffic light system so you know exactly what you need when you need it and how you need it

[00:35:47] Canada works the same Canada if you're storing goods in Canada you would need to have either GST or HST

[00:35:54] sales tax or the tax registration within that region to operate in Canada

[00:36:00] obviously yeah that's a massive market as well and if you're a US seller looking to launch into a new region it's kind of the natural

[00:36:07] progression is to go to Canada because you don't have to cross the Pacific

[00:36:10] Amazon also operates in Brazil in South America any comments on Brazil

[00:36:17] Mexico is Mexico as well

[00:36:19] Mexico is definitely a budding and growing market we don't currently service Brazil or Mexico so my knowledge on their regions isn't huge

[00:36:31] but I believe yeah you would need a Mexican VAT or Mexican tax number to be storing and selling goods within that region

[00:36:39] definitely a region to look and consider at though because yeah we've seen a huge amount of growth in Amazon in Mexico

[00:36:45] where it's 3PLs popping up, agencies you're assisting with the kind of optimization of the stores etc

[00:36:52] so yeah it's definitely a region worth considering but from my knowledge which is limited on that region

[00:36:59] I believe you would need a Mexican tax registration to start storing and facilitating your goods within that region

[00:37:05] so I get as a summary yeah I mean in your experience what are some of the main things that people have tripped up on with this VAT registration

[00:37:17] and as well as some of the best practices maybe they're related those things

[00:37:21] yeah the best best practice is I'd always say when it comes to VAT we see people trip up by

[00:37:28] and it's some people are successful is trying to like kind of handle it themselves like if someone says oh I'm going to do the UK application

[00:37:35] themselves the UK application process is very tenuous very kind of in depth around specific documents they want

[00:37:41] so sometimes I will speak to people when they say I'm going to do it myself and then two months later they're kind of still at square one

[00:37:48] so I always say even if you are looking to do it yourself always speak to someone before you do so

[00:37:55] yeah time frame as I mentioned earlier when launching into a new region everywhere is different and that's globally

[00:38:01] always make sure you know about the local the sales tax laws etc or the state tail sales tax laws

[00:38:08] so everywhere works different Australia you can store goods in there for a while and then you would have to register

[00:38:14] US if you store goods within a specific region from a D to C basis you would need to have state sales tax registration

[00:38:21] within that region and then you could reach things called nexus is which basically mean that you would need to gain registrations

[00:38:29] in other states it's all yeah it all depends really where you're looking to launch and how you're looking to do so

[00:38:35] so I'd say time frames is one of the main things that we say that people speak to people you'll have a really good

[00:38:44] conversation and say are they ready to go in a month they want to start sending products and then you just be like well it's not feasible guys

[00:38:52] we physically cannot push a registration through within that time and yeah always making sure that you kind of got the right

[00:39:00] technology and the kind of backing behind yourself when it comes to VAT and tax like filing reports etc so often businesses will be putting sales data

[00:39:11] sending it to someone then crunching data etc if you're utilizing a platform which is like integrated with

[00:39:17] software etc it can save you time on your filings and error when it comes to filings as well as pulling

[00:39:23] self-hards sales data from your marketplace so yeah just making sure that I'd say the main consideration when launching

[00:39:31] into a new region is definitely research so even looking at yourself doing marketplace opportunity reports

[00:39:38] checking if you can sell there and if it's feasible or the time frames to do so

[00:39:42] and I think just about one final piece really from my point of view is you can imagine as operators as an agency we get asked

[00:39:51] frequently about tax and yeah what do I need to consider about if I'm setting up in Germany for example

[00:39:57] yes top line we can steer people but tax as a specialism we've mentioned if you get it wrong

[00:40:03] it can be very expensive potentially end up in prison in some cases so let's make sure that you know if you need an expert

[00:40:11] speak to someone like tax tax they make sure you've got your up-to-date advice and because it is complex by its nature

[00:40:19] so I mean I think yes just don't try and wing it really is what I'm saying yeah wing it and as I said like

[00:40:25] anyone from a VAT or tax or reputable business will have a conversation with you they'll tell you kind of

[00:40:31] what you would need to do as I said it's not going to be easy to often do it yourself but if obviously if a

[00:40:38] business and brands wants to go do themselves as long as they got the information and they've been given the right

[00:40:42] advice what really more can you you do yeah and and the sellers were not tax experts are we saying

[00:40:49] we want to be able to find a quick solution that just deals with a lot of the number crunching so

[00:40:54] we can focus on no dealing with the consumer and selling you'd be surprised how long yet people would spend

[00:41:00] and time and doing something themselves yes from a VAT and tax perspective going around in circles trying to

[00:41:06] communicate with HMRC or tax officers which which is a joy isn't it I mean I'm you must get a buzz about

[00:41:12] that yeah if you've got somebody who's got a relationship there they're tax experts yeah I'm in the

[00:41:20] money that you'd spend with them you would probably that title and money is probably worth more to your

[00:41:24] business in places that you're already coherent in whether it's marketing sounds logistics manufacturing

[00:41:30] all of them kind of pieces which you probably have more experience in rather than yeah VAT or

[00:41:35] tax so pick your battles pick your battles that's all good advice cool well thank you so much for

[00:41:42] joining Tommy I think you know one of the things we have and I always talk about how we want to

[00:41:46] measure this podcast is you know like insights per minute kind of thing to provide value to all the

[00:41:52] listeners and I think you rating very very high over there so I think it's been as someone who's pretty

[00:41:57] much new to the subject just soaking up loads of things there so really really appreciate your time

[00:42:04] yeah absolutely no it's been a pleasure to speak to you to both today tax only will be offering

[00:42:11] anyone who kind of listens and follows up from this podcast we'd offer actually a free VAT

[00:42:16] registration if they're looking to launch in Europe so I'm sure we'll get some diary links

[00:42:21] distributed after this my email will be there as well so if anyone wants to have a conversation

[00:42:26] I just talk about VAT we've got some nice offers at the moment also as we mentioned earlier

[00:42:31] the white paper is going to be coming out after this so taking probably a deeper dive into all

[00:42:36] things VAT tax expansion and launching and then yeah any European customers as well

[00:42:42] optimize on and actually will be working together and collaborating at the PATS event the PATS

[00:42:49] event coming up in September so really looking to going out there working collaborating on

[00:42:55] that one together and hopefully meeting lots of sellers and trying not to bore them to death

[00:43:00] talking about tax. It's great yeah but if you know the world of pet and pet supplies

[00:43:03] and do come along and meet us in person I think the white paper that you mentioned

[00:43:09] just as a call out for our listeners go to ecominsights.co.uk for us blog you'll be able

[00:43:15] to download the exclusive report that's actually put together and cover a lot of the points

[00:43:20] we've already spoke about and do share your thoughts on social with the hashtag ecominsights

[00:43:27] and drop us an email on ecom.insights.co.uk otherwise come and find us on LinkedIn

[00:43:35] and you know just have a chat and let's carry on talking about tax.

[00:43:42] Let's do it. Thank you very much for both having me on today it's been a pleasure.

[00:43:46] Brilliant thanks Tommy.

[00:43:48] Excellent well yeah just to remember to subscribe and leave a review anyway

[00:43:51] things ring that bell if you're on YouTube as well and yeah keep curious

[00:43:57] and thriving in the world of e-commerce every day is a learning day so thanks a lot listeners.