Introduction.
Cross-border e-commerce (E-commerce) has been expanding worldwide with Amazon, eBay, Rakuten, Shopify, WooCommerce, and Corona Vortex, and is now the focus of attention by all companies. Cross-border e-commerce has been introduced with the positive aspects of being able to start selling within minutes of creating a site, and new sales opportunities from markets around the world. On the other hand, local taxes and various other costs are not shared much: local taxes such as VAT are levied and collected by the seller on the local buyer, but even in the case of cross-border e-commerce, there are cases of taxation, collection, and reporting.
Not all tax accountants, lawyers, and other domestic professionals have knowledge of overseas tax and legal affairs.
IN THIS COLUMN, OPTI CORPORATION, WHICH HAS EXTENSIVE EXPERIENCE IN THE TAX ASPECTS OF CROSS-BORDER EC, PROVIDES A "CROSS-BORDER EC TAX NAVIGATOR" IN A Q&A FORMAT. WE HOPE THAT THIS CROSS-BORDER EC TAX NAVIGATOR WILL BE OF HELP TO VARIOUS COMPANIES CONSIDERING CROSS-BORDER EC.
Q, I don't have enough sales to register for VAT on Amazon Europe.
Hello, I am looking for a new company to sell goods on Amazon Germany. Our company sells goods on Amazon Germany. We have not been concerned about getting a VAT number, etc. until now, but we have heard that a VAT number is now required. However, we are embarrassed to say that our company has not made many sales yet, and our monthly sales on Amazon Germany are about 500,000 yen.
Therefore, even if VAT registration is cheap, we would like to avoid it somehow. If you have any suggestions, please let me know.
A, BUSINESS CAN EXPAND THROUGH COMPLIANCE
If the monthly sales are 500,000 yen per month, the annual sales would be about 6 million yen. At this level, the scale of the business may still be small, but in many cases, the business is still viable. However, it is probably still a one-person business.
In the EC business, there is no rent. In addition, you can sell to the world.
On the other hand, there are some expenses.
For example, the following expenses will be incurred
Expenses using cross-border EC sales (e.g., overseas Amazon)
System usage fees - system usage fees for marketplaces such as Amazon and eBay
Advertising costs ・・・・・ Advertising costs within Amazon
Freight ・・・・・・・・ Freight from Japan to Germany, etc.
Taxes ・・・・・・・・ Taxes such as VAT registration, etc. Compliance costs and taxes themselves
If the annual sales are 6 million yen and the purchase price is 4 million yen, the profit is about 2 million yen.
In other words, the profit is less than 200,000 yen per month.
However, if you pay the expenses listed above, you may think that you do not have to pay for tax services. However, as a company that handles tax returns, we have no choice but to say, "Please do it properly. Here we explain why.
1, because the trend of tax collection becomes more and more severe every year.
VAT and other international indirect taxes are easy to collect from cross-border EC sellers. Sellers in their own countries are taxing, collecting, and paying taxes, but sellers in other countries are not taxing, collecting, and paying taxes. This is unequal to sellers in their own countries.
Currently, the EU takes very seriously cases of cheap sales by Chinese companies as well as cases of VAT evasion and failure to pay taxes.
As a result, the EU has been strengthening its taxation of non-EU sellers in the UK, Germany, and other member states. In some of these cases, as in Germany, joint and several liability is being demanded of marketplaces.
This trend is forcing major marketplace companies to exclude sellers who do not meet VAT registration and other requirements. And while this trend is only getting stronger each year, it is not expected to get lighter.
It is up to you to decide what your company thinks about European laws. However, it is essential to be VAT compliant when selling on Amazon Europe. (Note that you will also need to register and file sales tax in Amazon USA.)
2, Because it needs to be separated as a business expense.
We offer VAT registration services as inexpensively as 100,000 yen. We also offer easy plans with contracts starting from 3 months.
The reason for this low price is that we do not want to damage the image of Japanese companies due to non-compliance.
WE HAVE ORGANIZED A TEAM OF EXPERTS TO PROVIDE HIGHLY SPECIALIZED CONSULTING SERVICES. FOR THIS REASON, OUR HOURLY RATES TEND TO BE HIGHER THAN THOSE OF GENERAL TAX CONSULTANTS' OFFICES AND PRIVATE PRACTITIONERS IN JAPAN. HOWEVER, WE HAVE HANDLED A HUGE NUMBER OF VAT REGISTRATIONS IN THE PAST AND HAVE A LOT OF KNOW-HOW, WHICH HAS ENABLED US TO LOWER THE HOURLY RATE.
In addition, tax services in Germany cost 2 to 10 times as much as tax services in Japan, but tax filing services in Japan also cost quite a bit. (See the following reference "tax-accountant.com" https://www.zeiri4.com/c_1/c_1027/)
(Source: Lawyer.com https://www.zeiri4.com /c_1/c_1027/)
Even Japanese tax returns cost more than 20,000 yen per month even for annual sales of less than 10 million yen. However, it is certainly more efficient to leave taxation to the experts. If a tax return is filed incorrectly, it may need to be corrected after the return is filed.
If you intend to grow it as a business, we suggest that you make sure that you are tax-qualified, and that you register and file taxes.
Or, if you want to keep it at a side business level, it would be better to make profits only from Amazon and eBay in Japan (since sales tax registration is now required even for Amazon in the U.S.).
IN ANY CASE, PLEASE NOTE THAT FROM NOW ON YOU WILL NOT BE ABLE TO SELL WITHOUT A VAT NUMBER OR SALES TAX REGISTRATION NUMBER.
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