VAT for online marketplaces

Germany forces traders from non-EU countries to reigster for VAT - New liability regulation for marketplaces planned for 2019

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The government and revenue authorities have been aware of VAT evasion in relation to supplies delivered via internet platforms for some time now. Now, the customs and revenue authorities are adopting a raft of measures in an attempt to plug the tax leak and re-establish tax compliance. Since 2017, a number of cases have come to light in which sellers (usually in third countries) have sold goods to customers in Germany without VAT. Irregularities include invoices without VAT or underpayment of import duties (import VAT and duties).

The Annual Conference of Finance Ministers of German Länder has now announced a legislative proposal to combat VAT evasion in connection with internet / online trade.  As of 1.1.2019, the operators of online platforms/electronic market places will be liable for VAT if the trader sells goods on the platform but fails to pay the VAT on a domestic sale to the revenue authority. 

The aim of the proposal is to encourage the operators of online platforms/market places to verify the tax compliance of traders using their platform.

A similar regulation already exists in Great Britain and should result in only traders registered for VAT in Germany selling goods on online platforms since they will have to provide the operators of the platform with their registration documents (and tax clearance certificates if available). If traders have not registered, or have committed infringements, their accounts will be suspended. If the platform operator fails to do so, it will be liable for the tax loss in question. Up to now, platform operators have offered a number of services relating to the supply of goods. However, as far as VAT is concerned, they have always pointed out that traders are taxable persons and therefore responsible for their own tax affairs. Although this argument is basically correct, the legislative proposal nevertheless provides that, in future, platform operators will be liable for traders who commit tax fraud. 

That said, the question of liability will only arise if a tax debt has been established. Therefore, the main aim of the measure is to discipline traders (usually those abroad). They must register for VAT and pay the tax they owe to the revenue authority. This approach promotes tax compliance since domestic traders and traders who have already registered must also include VAT when offering their goods.

Furthermore, the Finance Ministers are already envisaging a pan-European regulation (planned for 2021) which would integrate online platform operators into the supply chain (a kind of “supply commission”). In terms of VAT law, this would result in the end customer always receiving the goods from the online operator – unless an exception applies – and the platform operator having to pay the VAT to the tax authority as its own tax debt. Thereby, online platform operators would simply be included in the supply chain by way of legal fiction and made the VAT debtor for all supplies made on their platform.

Affected traders and platform operators must now take steps in response to this development. The AWB would be happy to provide support in registering for VAT, producing the tax declaration and ensuring invoices are issued correctly.

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