Introduction
Expanding globally sounds exciting until you get hit with unexpected VAT fines or customs blocks. In 2025, the smartest global sellers follow one golden rule:
Proven Tip:
Register for VAT in every country where your goods are stored, sold, or pass a legal threshold (distance selling or import).
If you’re using Amazon FBA in Europe, fulfilling from Canada, or shipping into the UK, you need to get VAT-compliant fast.
Proven Tip: Register for VAT Where You Ship or Store Goods
VAT (Value Added Tax) is a consumption tax added at each stage of a product’s life cycle. If you sell in or ship into Europe, the UK, Canada, or Australia, you’re likely required to:
- Register for VAT
- Charge VAT on B2C sales
- File periodic VAT returns
- Track imports, exports, and warehouse transfers
- Provide tax-compliant invoices
In most cases, platforms like Amazon, Etsy, or eBay do not handle VAT for you. You are responsible.
IRC Tax Code Relevance
While VAT is not part of U.S. tax law, your foreign business activity can affect your U.S. tax reporting, especially if:
- You claim foreign tax credits (IRC §901)
- You operate through a foreign branch (IRC §989–§995)
- You need to file Form 5471 or 8865 due to foreign ownership
Relevant IRS Forms (For U.S. Taxpayers with Foreign Business)
| Form | Purpose |
|---|---|
| Form 1116 | Claim Foreign Tax Credit for VAT paid |
| Form 5471 | Report ownership in foreign corporations |
| Form 8865 | Report foreign partnership interests |
| Form 8938 | Report foreign financial assets |
| FinCEN 114 (FBAR) | Report foreign bank accounts used for VAT refunds |
Example: Ignoring VAT Cost One Business $22,000
An apparel seller from California used Amazon’s Pan-EU FBA program in 2024 but never registered for VAT in Germany or France.
When Amazon flagged their account for non-compliance in early 2025, the seller faced:
- €8,000 in back VAT
- €3,500 in penalties
- €9,000 in frozen payouts
After hiring a tax expert and registering retrospectively, they regained access but it cost them over $22,000 in total.
Step-by-Step Guide to Handle VAT, Customs & Duties in 2025
Step 1: Identify Where You Have Nexus
Check where your inventory is stored or shipped from. VAT may apply in the UK, EU, Australia, Canada, and more.
Step 2: Register for VAT in Each Country
Use a local VAT agent or digital service (e.g., Avalara, Taxually, hellotax) to complete registration.
Step 3: Update Product Listings and Invoicing
Include VAT in your pricing and show it on your customer invoices.
Step 4: File VAT Returns On Time
Each country has different filing cycles (monthly, quarterly). Missing a deadline can lead to fines.
Step 5: Record VAT Paid for U.S. Foreign Tax Credit
If VAT was paid and not recoverable, work with your CPA to claim it on Form 1116 as a foreign tax credit (subject to limits).
Conclusion
In 2025, international selling can boost your brand but only if your VAT and customs handling is tight. Waiting to register or ignoring duty thresholds will cost you in fees, blocked accounts, and lost customers. A proactive compliance setup gives you smoother imports, tax savings, and peace of mind.
Call to Action
Selling across borders in 2025? Need help with VAT, customs paperwork, or claiming foreign tax credits on your U.S. return?
Email Anshul Goyal, CPA EA FCA at anshul@kkca.io to schedule a VAT and customs compliance review.
Disclaimer
This blog is for informational purposes only and does not substitute legal or tax advice. Always consult with a tax professional for international and U.S. cross-border compliance.
FAQs
1. Do I need to register for VAT if I sell through Amazon FBA in the UK or EU?
Yes. If your goods are stored in an EU/UK warehouse, local VAT registration is required.
2. Can VAT be claimed as a U.S. tax deduction?
No, but you may be able to claim a foreign tax credit on Form 1116 if it’s not recoverable.
3. What happens if I don’t register for VAT?
You may face audits, platform penalties, import holds, or frozen payouts.
4. Is VAT the same as U.S. sales tax?
No. VAT is charged at every stage of the supply chain, while sales tax is added only at the point of sale.
5. How do I report VAT-related income on my U.S. tax return?
You report gross sales as income, and claim unrecoverable VAT through Form 1116 if eligible.
About Our CPA
Anshul Goyal, CPA EA FCA, is a U.S.-licensed Certified Public Accountant and IRS Enrolled Agent. He specializes in international tax and compliance for eCommerce brands, U.S. exporters, and Amazon sellers operating in the UK, EU, Canada, and India. Anshul helps clients avoid VAT disasters, recover from non-compliance, and stay audit-proof across borders.
To schedule a session, contact Anshul at anshul@kkca.io.