A new round of crackdown! A number of stores are no longer able to accept payments

Since the UK VAT address problem tax inspection began in September this year, until now, there have been 5-7 waves of tax inspections, large and small, and batches of sellers have been exposed and their accounts have been closed. The most serious case is that nearly ten accounts of a seller were swept in succession, resulting in a loss of tens of millions.

As the year draws to a close, a new round of strict inspections is coming again. Local European accounts have been "conquered", tax inspections continue, and a number of sellers' stores have been unable to pay. Some industry insiders also say that this may evolve into "KYC".

European local accounts were checked for tax again, and a large number of stores are no longer able to pay

Recently, sellers have been reporting that they have received tax audit emails from Amazon, saying, "Starting from December 14, 2023, payments for all your stores operating globally (except Amazon.in) have been deactivated."

The reason why sellers received the email mentioned above is that Amazon Europe has recently conducted strict tax audits on local accounts, which is what we often call batch scanning. The accounts involved are mostly sellers with sales of several million euros. Their payments have been suspended, and there are many problems such as the companies to which the local accounts belong are not actually operating.

The sellers who received the emails began to complain again, saying, "I haven't sold many products yet, and I haven't made back my investment yet, so why am I the only one who gets hurt every time?" and "I'm worried all day long, and there's really no way to escape." However, these sellers are not innocent in receiving this "treatment."

The email mentioned that after Amazon investigated the seller's account, it found that the seller's company was not established in Europe or had the purpose of evading VAT.

If the seller wants to resume normal operations, they need to provide additional documents within 60 days from the date of the email (some UK sellers have emails within 30 days) to prove that the seller's business is established in the EU in accordance with the legislation. Amazon will restore the seller's normal operations based on the written evidence.

If the seller is unable to provide relevant evidence to prove that the company was established in the region in accordance with local e-commerce VAT legislation, Amazon will directly conclude that the company is not established in the UK and will begin to collect and remit VAT. The seller will need to pay the full amount of VAT to Amazon or be exempt from VAT.

Sellers can continue to sell on Amazon, but no funds can be paid out of their accounts. Apparently, a wave of sellers have had their funds frozen, and their sales are mostly in the millions of Euros.

In addition, industry insiders advise sellers not to submit audit information at will, because the platform and European audit system have zero tolerance for false information. Once fraud is discovered, the funds and goods in the account may be frozen immediately, and the seller may never be able to recover.

80% of European local accounts are going to die?

Previously, there were rumors that "European Amazon will start synchronizing information with the tax authorities on January 1, and Amazon will complete the last and largest sweep of accounts this year from December 5 to 15. It is estimated that 80% of local accounts in the market will be wiped out."

Rumor has it that this wave of sweeps will mainly target local accounts on Amazon Europe that have been traded for more than 6 months and have sales of more than 1 million euros. Industry insiders recommend that such sellers stop replenishing FBA to avoid high risks.

Now it seems that these rumors are not groundless, but they are slightly different from the facts.

As we all know, taxes and fees on the European site have always been a considerable expense. Many sellers try their best to avoid taxes, such as registering a foreign local shell company and finding a service provider to change the backend tax information. They have successfully avoided taxes.

But it didn’t last long. This year, European sites continued to conduct tax audits and successfully cracked down on a wave of problematic stores. Some stores were directly suspended, but some sellers still held on to their luck.

"We are a small company. In order to avoid the withholding of European VAT, we bought several local accounts from the service provider, including those in the UK, Germany and France," said a seller.

At the beginning, this method can indeed increase product profits, but since the beginning of this year, various local accounts have continued to have problems, such as KYC and tax audits. In addition, these accounts basically sell three-no products, so as long as they encounter an audit, they are basically GG, and can only be used to make quick money.

The platform's compliance process is accelerating, and the review of local store information of Chinese legal persons is becoming more stringent. Sellers are advised to behave themselves.

Tax checks on local European accounts may evolve into "KYC"

Amazon’s pace of tax inspections has never stopped this year. From the UK VAT tax to the collapse of its European local accounts, there have been at least five waves of tax inspections. In the end, all of this points to one key point, which is to provide authentic information.

Taking Amazon UK as an example, sellers need to provide evidence of VAT registration, evidence of physical operation at your designated UK business address, proof of registration of your legal entity/partnership with the UK Companies Registry, proof of identity and UK residence of directors/partners, proof of permanent employment and UK bank account, etc.

Several sellers who have been strictly inspected said that Amazon is currently restricting and strictly reviewing the information of Chinese legal persons with European local accounts such as UK and FR, especially KYC (seller qualification review), which has affected the KYC review speed of new accounts.

In mid-November, Amazon's European local accounts were suddenly reviewed, and many sellers' accounts were closed. Many sellers said that they had encountered KYC. They had just received an email to pass the review, but they had to start the review again within 24 hours. Moreover, they had already been reviewed once in early September.

Each of these examples undoubtedly demonstrates the severity of the European site's current crackdown on local accounts.

Sellers who have not used local accounts hope that this will become a normal practice; sellers who have used local European accounts say that they have experienced repeated back and forth and are terrified; new sellers with local European accounts who want to join the game if they can't beat them look embarrassed. It's not a one-day thing for local European accounts to cause sellers to involve themselves with their advantages. Under compliance, sellers are deprived of the opportunity to exploit loopholes.

Some sellers even admitted that they could simply regard the European local accounts as a consumable item. Even if they did not pay the taxes and rescued the funds, the accounts would still be checked. They would be deactivated sooner or later anyway, so they should be relaxed.

In the view of some sellers, the space available for local accounts is getting smaller and smaller. What do you think?

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