So your successfully selling your board game in the United States. Congratulations! Now you want to expand your market and sell in Europe. You now need to ask yourself; What's the market size in Europe? What is Value Added Tax (VAT)? Do you have to sign up for a VAT registration number? How do you decide which country to register for VAT in? How do you not overpay VAT? How do you list on Amazon in multiple countries in multiple languages? Apostrophe Games has had 6 successfully funded Kickstarter games. None have been huge sellers but a few have done well post Kickstarter which is a difficult accomplishment. We've had a lot of success selling on Amazon using Amazon's Fulfilled By Amazon (FBA) service. We wanted to expand to Europe to increase our potential audience since Amazon now offers FBA services in many European countries. Unfortunately, there just aren't many resources online to tell you how to do this yourself. Some resources tell you to hire a accountant or another company that will pay the VAT for you and act like the importer of record, but if you're a small publisher like us, you can't afford to pay a fee on top of your other expenses.
What's the market size in Europe?
At the time of this post, Amazon offers Prime for the following countries:
Amazon.de: (Germany & Austria) 89.5 million
Amazon.fr: (France) 66 million
Amazon.co.uk: (UK) 64 million
Amazon.es: (Spain) 47 million
Amazon.it (Italy) (Prime available but FBA not available for all products)
This makes the total available market for FBA 266.5 million, compared to 323 million in the US. We understand not everyone speaks or reads English, which means you may consider printing your games in other languages. The good thing is that in addition to the UK, many Germans speak and read English. We've found the English version of our games also sell in Germany.
What is VAT?
To start selling into Europe, you need to understand what VAT is. VAT is a value added tax that gets deducted from the sale of each one of your games. If you charge €15 for your game you will owe €3 in VAT. VAT isn't charged like sales tax here in the US where it's automatically added on. VAT is actually part of your total sale. That means if you price your game at €15, you will be left with €12 after paying VAT.
Do you have to sign up for a VAT registration number? Legally you must pay VAT as soon as you have a place of business in Europe. By utilizing Amazon's FBA service, you're automatically qualified as having a place of business in Europe so you must register for a VAT registration number. You can instead decide to only sell on Amazon in Europe without housing your inventory there. You'll then house and ship your games from the US in which case you won't pay VAT but you will have to pay a hefty shipping cost each time you ship. And you'll have far fewer sales if you're not using FBA because then you can't offer Amazon Prime in Europe. How do you decide which country to register for VAT in?
To sign up for the VAT, you need to choose first which country you want to register in. Each country has its own set of rules on how often you need to file and how much and how often you need to prepay. Keep in mind you will have to fill out online forms in the country's local language so if you don't speak the language, it will be very cumbersome. Germany offers their online forms in English however they require you to file on a monthly basis for your first 12 to 24 month in business. We, at Apostrophe Games, already have a full-time jobs and create games for fun in our spare time. We didn't want to create more paperwork for ourselves than we needed to so we decided against Germany. We chose to register in the UK (Since writing this the UK has voted to leave the EU. If that actually happens in the coming years, we may need to house our inventory in another country as well). In the UK, for small publishers like us, we were only required to file annually based on the estimated VAT we'd owe our first year. We had to make estimated payments our first year in April, July, and October in the amount of £125 (~$178) each. Their website is pretty straightforward and their representatives are incredibly helpful. If you call the HMRC (Revenue and Customs office) and ask for help, they will spend time with you and walk you through the whole sign up process. We actually had someone spend 30 minutes with us walking us through step-by-step how to fill out the online forms. Tell them upfront that you are an Amazon seller. They encounter a lot of us and know exactly what buttons and boxes to check on the forms. View the HMRC VAT website here: https://www.gov.uk/topic/business-tax/vat
How do you not overpay VAT? You have to pay VAT when you ship your products to the Amazon warehouse and it will be paid by whichever shipping company you work with (e.g. UPS, FedEx, DHL, etc.) You'll need to sign up with a shipper and get an export account with them. They're very easy to sign up for. You'll want to enter your credit card information as well. These companies will pay the import taxes, and VAT upon entry into Europe and will charge you for those afterwards. The VAT is calculated from the manufacturing cost of the games, so it won't be very high, even if you're charged a high percentage (we were charged 40% VAT). You will need to enter that info when you ship your products.
Don't be scared. Even though you're required to pay VAT two times (once when you're games enter Europe and once upon making a sale), you're not actually getting double taxed. The VAT paid upon import is deductible from the VAT you pay later on sales. Just think of it as paying some of your VAT in advance.
Here is an example of how the math works (we'll keep the currency the same for consistency):
Let's say you ship 1,000 copies of your game to Amazon in Europe. Your cost to manufacture each game is €2. You will be charged €800 VAT upon import (at 40%). Based on your estimated sales, you're required to prepay another €1000 throughout the year. Let's say you sell all 1,000 units over the course of the year at €15 each. You collect €15,000 and owe €3,000 (20%) in VAT.
€3,000 (total VAT owed based on sales)
-€1,000 (amount prepaid based on estimated sales)
-€800 (amount paid upon import)
=€1,200 (remaining VAT to pay)
If you do not register for VAT but you still ship your goods to Europe, you will be automatically charged VAT upon entry into the country and then you won't be eligible to have it deducted from future sales.
How do you list on Amazon in multiple countries in multiple languages? We suggest making Amazon UK your primary country. Before your inventory arrives, you can create your product pages on Amazon.co.uk. Once you've created the product page, use the site toggle in upper right part of the screen to switch to Amazon.fr, Amazon.de, and Amazon.es. The pages change to the local language so you'll want to scroll to the bottom of the page and select English.
Create product pages in each other country, just as you did on Amazon.co.uk. As you post new products in each country, as soon as you enter your UPC code it will prompt you and ask if you want to combine this listing with that listing from your primary country. You definitely want to do this. It allows you to edit the price for each country on one screen. You will use the individual country pages to cater the text per country. We used Google translate to help us get the wording right. If you're like us, you're not a big enough publisher to create games in many different languages. We suggest putting a tagline at the top in your description that states that this is an English version of the game so customers aren't caught off guard when it arrives.
That's all for now. We'll add more here as we learn more about the process. Feel free to send us questions or comments on Facebook at https://www.facebook.com/apostrophegames