Here’s the process with doing FBA in the UK, with VAT, etc…
Let’s consider an example like Face Cream.
Now the VAT tax for a product in the beauty category is likely around 20%. If you ship over $1000 ‘wholesale’ cost of goods of Face Cream into the UK, you will pay $200 (20%) immediately, and that money is held in an escrow account. Once a quarter, as you file your VAT returns (and you’ll need a company to help you with that), you will be charged 20% of the total ‘gross’ sales amount. For instance, if your gross sales were $5000, then 20% is $1000, but you’d owe the difference of $800 ($1000 – $200) when you file.
Another wrinkle is if you add FBA shipping to the other EU countries like Germany, Spain, Italy and France… which is definitely recommended. The wrinkle is that each country has it’s own unique VAT variations. In Italy for example, you will be required to file VAT every month in addition to your normal VAT filings with the UK.
VAT can get tricky very fast, and in my opinion, it’s much better to do Fulfillment by Merchant (FBM) at first to see what the hot sellers are. Once you have that data, then decide if it’s worth it to go FBA. I found a company, Meridian, that did all of our VAT filings for $300 a return, but their prices may have increased from a few years ago.
With FBM, you’re not worrying about VAT, filings or anything like that. With FBA, you better have either super huge margins or tremendous volume selling that Face Cream to make up for the fees, including high shipping, VAT, etc.