Online retailers, who supply private customers in Germany, are liable for VAT from a delivery threshold of 100,000 EUR. For a long time, it was difficult to hold retailers from abroad to account when they had failed to pay this tax. Now, a law, which came into effect on 1st January 2019, causes the market places and the platform operators to assume their VAT responsibilities and, thus, increases the pressure for them to get registered accordingly. If you want to trade with legal certainty in Germany, you can rely on convenient applications that additionally increase the level of efficiency of your own online business.
„Tax haven: the Internet“
German retailers and customers have been complaining for a long time about the fact that foreign sellers circumvent the VAT, which is obligatory in this country. Essentially, the criticism concerned sellers from the Far East who offered their products on market places and e-commerce platforms, but did not pay taxes to the tax authorities. If a third country business operator from China delivers goods to a customer in Germany, he is either obligated to pay import VAT or to register for the purpose of sales taxation. Between 2016 and 2018, however, only a few business operators from largely Asian third countries were registered for VAT; neither the import VAT was paid in Germany. Due to missing addresses, the tax investigators usually had no access to retailers who had failed to pay this tax. Thus, each year, tax revenues in the amount of hundreds of millions of euros escaped the tax authorities. Throughout the EU, it is even estimated that the tax loss amounts to five billion euros annually.
Law against VAT fraud
The platforms, first and foremost Amazon, saw themselves as intermediary between online retailers and customers. The retailer himself was responsible for the fulfillment of tax obligations. Indeed, the German law intended the vendor, i.e. the market place seller, to be liable to pay the tax.
This changed at the end of 2018
In the fight against tax fraud in online trading, the Federal Government tightened the regulations for market places. Therefore, platform operators, as e.g. eBay or Amazon, are generally liable for retailers/sellers who do not pay VAT. Now, the companies have to submit a certificate proving the tax registration of the retailers represented on their platforms.
The law has already been effective
While only 430 retailers had been registered for tax purposes prior to the revision of the law, by now, the responsible tax office in Berlin-Neukölln has had more than 9,000 registrations of online retailers. The new registrations mostly involved retailers from the People’s Republic of China, including Hong Kong, Taiwan and Macau. The tax authorities expect an additional tax revenue of up to 500 million euros due to the new legal regulation.
Legally safe online trading
The new liability rules are
a powerful tool for tax authorities to avoid losses of tax revenue. However,
the administrative effort is enormous for platform operators, as they not only
collect the certificate proving the tax registration from their retailers, but
also are to verify their authenticity.
If an online retailer fails to comply with his tax payment obligations, the tax authorities notify the platform operator, who is liable for the unpaid VAT from that point in time pursuant to § 25e para. 4 UStG (Law on VAT), unless the respective online retailer’s further sales on the platform are suspended.
The administrative effort also increases for online retailers. In order to comply with the tax obligations efficiently and legally safe, the use of according tools is recommended.
The App Quaderno of our cooperation partner (www.quaderno.io) offers the possibility to read tax-relevant data from the according platforms and to provide us as a tax consultant with these data in a standardized format.
Then, the registration and monthly advance return for VAT can be carried out efficiently and legally safe. The application is especially suitable for retailers who operate globally and supply customers in a variety of countries. Instead of dealing intensively with the tax requirements of individual target countries, you can take care of the expansion of your own online business.