A guest post submitted to the e-Residency blog by a member of the e-Residency community.
As a business owner providing services for Estonian e-residents, I always receive the same question: “Does e-Residency allow companies to sell physical products?”
Actually, there are so many niche areas in the e-commerce industry where e-Residency can solve many issues. However, in this post I just want to touch on a few key points for those who want to discover how to sell on Amazon in Europe using FBA (Fulfillment by Amazon) without knowing where to start.
Before going deeper, I’d like to share a bit about me and my company as a partner service provider of e-Residency program.
I founded my first Estonian company in 2010 and after 1 year later I moved to Estonia.
It was such an exciting experience for me because of the whole process took just 15 minutes and was fully online with the help of my local accountant that I was working together with at the time.
As an entrepreneur who grew in Turkey where the bureaucracy is a mess and makes life even more difficult for business people, I already realized back in 2010 that Estonia will change the way of starting a company for people around the world.
Well, it happened even earlier than I’ve expected via e-Residency program thanks to the great people behind the program who are currently building a better future for the world.
After long years experiences in building several kinds of businesses both in the offline and online side, I have found a chance to work with great experts and mentors in different fields but was also faced with so many failures that turn into big experience and also passion to help people start and grow their online businesses with ease.
After realizing my personal mission aligns with the purpose of the program, I have decided to launch Digital Estonia in early 2018 to help people starting their internet businesses in ease via Estonia. Because I believe that anyone in the world should be able to start an internet business without any hassle to fulfill their passions.
Currently, we run Digital Estonia with a few local experts and aim to make it all-in-one digital business tool for internet entrepreneurs to start and run their businesses by getting company formation, legal, accounting, banking, and all the necessary payment gateway services.
So let’s start to highlight Amazon FBA business in Europe and how e-Residency can be a great solution to make it easier for online sellers.
Why do so many internet sellers consider entering European markets with Amazon FBA?
There is no doubt entering the European market means that you will have access to millions more online shoppers, with the same ease and convenience of the Amazon FBA program in the U.S. You’ll be able to sell your products in five separate marketplaces (UK, Germany, France, Spain, and Italy) and ship to more than 25 countries around Europe from one central account.
If you have already searched for information about selling on Amazon in Europe with FBA, you may know that the EU market has more than 300 million online buyers and the market is still growing. Amazon EU is significantly less saturated with products, and you can still find plenty of high volume niches that are not largely competitive.
What are the main challenges waiting for Amazon sellers entering the European market?
- Complex EU VAT regulations
- Difficulties finding the right country to establish a company
- Issues with high incorporation costs
- Large amounts of bureaucracy
What is VAT and what are the challenges sellers?
VAT, or Value Added Tax, is a consumption tax which applies to goods and service that are bought and sold for use or consumption in Europe.
As a seller, you collect the applicable VAT from the buyer at the point of sale. You are then required to forward the VAT payment to the relevant country’s revenue authority on specific dates.
For example; if you want to store your products in an Amazon Germany warehouse, then your company should have a VAT number in Germany (this is not affected by where your company is incorporated or how much revenue it makes.).
If you want to store your products in all 7 European countries where Amazon has warehouses, then your company is required to have VAT numbers from each country. Also, your company needs an EORI number in the country where you will import your products at first to be sent to Amazon warehouse.
After getting VAT numbers and the EORI number, the process continues with the monthly/quarterly VAT filings in the countries where the products are stored. For that, you should find local fiscal agents who help companies to fill their VAT returns in the related countries and track the thresholds of the sales where the products are sold, while noticing that sellers obtain a VAT number in these countries if their sales have exceeded the VAT thresholds.
These processes are so complex for most sellers, for that reason they cannot expand in Europe.
So, let’s sum up the requirements for selling on Amazon in Europe with FBA:
1- Registering a company in Europe (if you don’t have any in the countries where Amazon supports, please check the list: https://sellercentral.amazon.co.uk/gp/help/external/G200405020)
2- Getting a VAT number for the company relating to each country where the goods will be stored at Amazon warehouses
3- Doing monthly/quarterly VAT filings in the country where the company have a VAT number
4- Handling accounting and tax compliance where the company is registered
5- Accessing business banking solutions for receiving and transferring funds
How e-Residency can help you start this process in Estonia for less money and hassle than starting in any other European country?
Thanks to the Estonian Digital State System and the e-Residency program, you can easily form your EU-based company with your digital Estonian ID-card 100% online, securely from anywhere in the world.
The cost of e-Residency card is just 100€ and sent to the nearest Estonian Embassy in your home country and e-Residency does not have any direct influence on the tax residency. So, being an Estonian e-Resident does not mean that you become the Estonian tax resident.
What are the advantages of running an Amazon FBA business in Europe with an Estonian company?
- It is cheaper to incorporate in Estonia than most of the other EU countries
- The online state system allows you to access and monitor your company’s registration files with transparency
- No paperwork, no bureaucracy, and no local director that has control over your company
- 0% corporate tax on non-distributed profits (if you owe taxes in Estonia)
- Remote business management via digital signature (contractor, employment, etc.)
- Lower administration costs compared to other EU countries
- Shared capital payment for a ‘Private Limited Company’ is just 2,500€ and are not compulsory to be paid when first starting off.
- Access to online banking solutions through the Estonian e-Residency program and owning international bank accounts in multiple currencies
- Growing your company through the e-resident community where like-minded entrepreneurs around the world with Estonian companies are keen to engage and share valuable information with each other.
How to handle VAT registrations and VAT returns in other EU countries where the products are stored after registering the company?
Digital Estonia Consulting helps you register your company, handle your company’s accounting and VAT registration in Estonia, and take care of any other VAT obligations that must take place in other European countries through our partners’ network.
We see e-Residency as a gateway to expand in the European Union for e-commerce business owners and are working to innovate our services to help different niches in the e-commerce industry.
If you want to sell on Amazon in Europe with FBA but do not know where to start, e-Residency can be the best first step for you to take and please feel free to contact us for your inquiries or questions.