What do I need to know about taxes as an Amazon seller?

Taxes are also important for Amazon sellers, and you should take care of the correct registration and reporting of your taxes in good time. For many, however, the complex tax laws in Germany are quite a deterrent. But don’t worry; we summarize the most important rules for you in this article so that you can run your Amazon business with confidence.

Amazon Seller: Taxes at a Glance

Since very few Amazon sellers start a GmbH right away, we limit ourselves in this article to all the information you need as a sole proprietor. With a GmbH, the subject is much more complicated, and you should definitely consult a tax consultant in this case.

Income tax

Income tax is determined annually by the tax return and is subsequently paid to the tax office. As the name suggests, this amount refers to your income, i.e., your profit (income minus expenses).

Profits have to be taxed in Germany only if the basic exemption amount of 9.744€ (stand 2021) has been exceeded. For couples, this amount doubles to 19.488€. If your income exceeds this allowance, you must tax your profits annually. The amount of your taxes (the tax rate) is determined based on your winnings.

For a taxable income (level 2021) of 9.740€, the income tax is 0€; for 12.000€, the income tax is already 366€ and reaches the amount of 7.990€ at 39.000€. From an annual taxable income of 57.919€, the peak tax rate of 42% is applied. This means that every euro above this income limit is taxed at 42% percent.

VAT

If you do not make use of the Small Business Scheme, you must also show VAT on your invoices. This is paid monthly or quarterly to the tax office. VAT maybe 19% or 7% depending on the product sold. The reduced tax rate of 7% applies, for example, to the following products:

Food and some drinks

Miscellaneous agricultural products

Books and magazines

If your products do not belong to one of these groups, you will pay the full VAT of 19%.

Amazon FBA Seller – Checklist on Taxes

You should check the following points before starting your activity on Amazon and after you have already sold goods.

Before the start

Does the Small Business Regulation or the Standard Taxation apply to you?

Request tax number and VAT ID

Application for tax certificate (22f)

Store VAT ID on Amazon

Deposit your tax certificate with Amazon

No later than the sale

Keeping accurate accounts

Gf. looking for a tax consultant

Submit a VAT advance declaration (if required)

Submit an annual tax return

Small Business Scheme for Amazon Sellers

The Small Business Scheme exempts prospective entrepreneurs from VAT obligations. In concrete terms, this means that as a small entrepreneur, you do not have to worry about the VAT advance declaration. So you write your customer’s net invoices, but in return, you pay VAT on all incoming invoices.

For freelancers, the small business regulation makes sense. For Amazon merchants, however, this rule is usually less useful. There are at least two reasons for this:

  1. Many Amazon sellers import goods from abroad

As soon as you import goods from abroad to Germany, you have to pay the so-called import sales tax. To do this, you need a VAT identification number and are therefore automatically subject to the provisions of the VAT Act.

If you import goods from a third country, you will have to pay VAT on the value of the goods, i.e., the entire purchase price. As a small business, you will not be refunded this amount.

  1. Turnover limit for the small business scheme

If you use the Small Business Scheme, your turnover in the previous year must not have exceeded €22,000. What many do not know is that this number decreases with the months. So if you start your business in September, you can only make 7.333€ sales this year.
So if your margin is 25%, you would make about 1.833€ profit in a year with a turnover of 7.333€. For the effort you have, it’s hardly worth it.

Request tax number and VAT ID

In general, you have to register with the tax office for tax purposes. You will receive a tax number and a VAT ID, which you can use for communication with the tax office or tax office. It is urgently needed to pay VAT.

You can apply for both numbers using the same form (questionnaire for tax registration). You will receive the form from your responsible tax office and can best fill it out on-site together with an employee. After submitting the completed form, you will receive your tax number and VAT ID by post.

Tax certificate 22f

Furthermore, a tax certificate is mandatory to sell on Amazon. The tax certificate 22f proves that you, as an entrepreneur, properly pay your taxes. You can apply for this tax certificate directly from your tax office and then upload it to Amazon.

Tax return for Amazon sellers

In the annual tax return, you indicate what expenses your company had over the financial year and how much sales your company made. Part of the tax return is the determination of profits, from which your final tax rate (see income tax) is calculated.

The submission deadline for persons who make their own tax returns is 31. July of the following year. If a tax consultant helps you, they have up to 28/29. February of the year after next.

What should be considered when importing goods from abroad?

Meanwhile, there is a huge offer for goods that are produced cheaply in other countries (e.g., China). In addition to many websites that export directly from abroad, you can also import cheap products from other countries on eBay or other auction sites. This sounds tempting, of course, but what about taxes and customs costs if you order goods from abroad?

Import sales tax on imports

A key cost factor is the import sales tax, which refers to the Value of goods. The Value of the goods includes the product price (including foreign Value added tax), i.e., also, the costs for shipping. Since imports from abroad are usually not paid in euros but in dollars, this amount still has to be converted into euros. For this purpose, the conversion rate of the German customs is used.

Customs costs from 150€ Value of goods

Customs costs are only calculated from a value of 150€. All goods below this amount are duty-free. For large orders, the respective customs costs have to be researched, which differ depending on the type of goods. The percentages range from 0% to just under 18%; for an accurate and up-to-date listing, it is recommended to visit the website of the German customs.

Conclusion

As an Amazon seller, there are a number of regulations to observe when it comes to taxes. Therefore, it is important that you approach the matter professionally from the beginning and check whether, for example, you sell as a small business with regular taxation. This can have a big impact on your finances.

If in doubt, consult a tax advisor to avoid paying too much or too little tax in the end. In principle, it pays to keep an eye on the subject of taxes right from the start. By the way: With Accountable, you do your taxes professionally from the first sale – and for free

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