(Hint: Here there is an update to the following information).
On Amazon and eBay alone, it is estimated that traders from third countries, especially China, evade sales taxes of up to 1 billion euros per year in Germany.
A draft law is now on the table which should solve this problem from 2019 and goes well beyond.
- Marketplaces may, under certain conditions, be held liable for the unpaid turnover tax of all marketplace traders.
- The German tax authorities have been taken by surprise by the challenges of the digital economy-to some extent transferring the problem of determining the tax base to the marketplaces.
- Companies that do not fully comply with their tax obligations run the risk of being excluded from marketplace trading in the future.
To what extent will eBay and Co. be liable Amazonfrom next year?
The regulation is simple and clearly worded and goes far beyond the problems of Chinese traders.
The draft of Section 25e (1) UStG reads as follows:
The operator of an electronic marketplace (operator) is liable for the unpaid tax arising from a trader's supply which has been legally established on the marketplace provided by him.
Thus, the marketplaces are liable not only for those Value Added Tax of traders from the third country (in particular China), but for Value Added Tax all deliveries that are mediated via the marketplace.
This means that marketplaces can be held liable for every euro Value Added Tax that is not paid by a marketplace trader.
Many constellations are conceivable.
- In the first instance, the law is aimed at traders from China who do Value Added Tax not pay theirs.
- But also traders from Germany or the EU, who for example have slipped into insolvency and are no longer able to pay their tax arrears, can trigger liability.
- The focus is also on private individuals who knowingly or unknowingly act in a commercial capacity.
== To ensure that the liability risk for the marketplaces does not become incalculably high, Section 25e of the German Turnover Tax Act also provides for exceptions to liability. ==
Exemptions from marketplace liability
The liability does not apply in the following cases, among others.
- The marketplace can prove that it Value Added Tax had no knowledge of the non-payment of the fees or could not have had such knowledge according to the due diligence of a prudent businessman.
- For traders who do not register as entrepreneurs on the marketplace but still act commercially, liability does not arise if, on the basis of the Type, quantity and amount of turnover not a commercial trade was to be assumed.
How can the marketplaces meet the above criteria and what are the implications?
Disclaimer: Commercial due diligence of marketplaces
Section 25e UStG stipulates that the marketplaces had no knowledge of the lack of compliance by the respective trader in particular if they had a certificate from the tax office responsible for the trader.
The likewise new Section 22f of the German Turnover Tax Act (UStG) defines the content and criteria for this certificate (hereinafter referred to as the certificate).
According to this, the tax office responsible for the retailer confirms the validity of the retailer's master data (e.g. address and tax number) and that the retailer has complied with his tax obligations to date and will continue to do so in the future.
The certificate will be issued for a limited period of time.
This is ultimately a tax clearance certificate, which, if it is not issued, can block access to marketplace trading.
§ Section 22f para. 1 sentence 4 UStG: The issue of the certificate may in particular rejected if the entrepreneur has not or not fully complied with his tax obligations and is not expected to comply with them in the future.
This may mean, for example, that a trader who regularly submits his Value Added Taxpre-notifications late and still has tax arrears in case of doubt, is very unlikely to receive this certificate.
The consequence could be that the marketplace blocks this trader in order not to be liable for him Value Added Tax in case of doubt.
The certificate is issued by the competent tax office to the trader upon request. It also forwards this information to the Federal Central Tax Office. The marketplaces are then allowed to obtain the relevant information there.
Disclaimer of liability: Monitoring the type, quantity and amount of sales
The exclusion of liability for so-called pseudo-private traders-that is, traders who register on a marketplace as private individuals and yet act commercially-is formulated rather vaguely.
In this case, the marketplaces are only not liable if the type, quantity and amount of sales did not indicate that the trader was a commercial trader.
The marketplaces as branch offices of the tax offices
Section 25e UStG also stipulates that the tax offices may also initiate so-called collective requests for information from the marketplaces. The current legal hurdles (e.g. that a sufficient initial suspicion must exist) expressly do not apply in this case.
In this respect, the new regulation also creates a legal basis for turnover tax grid searches on electronic marketplaces.
Grid searches will be facilitated by the fact that marketplaces will be obliged, from 2019 for each delivery record the following information:
- Master data and tax number of the trader (for private sellers the date of birth instead of the tax number),
- the start and end dates of the certificate,
- the place of departure and destination, and
- the date and amount of the turnover.
How exactly would the liability of marketplaces be handled?
Before the marketplace can be held Value Added Tax liable for non-payments, the appropriate Value Added Tax amount must first be determined.
The responsible tax office must recognise the tax liability in Germany and then determine the basis of taxation - in this case the amount of the remuneration.
Since the marketplaces from 01.01.2019 must document all deliveries that begin or end in Germany and report them to the tax office on request, the technical foundations would be laid.
However, the marketplace as a so-called liability debtor Value Added Tax may ultimately only be used if enforcement against the tax debtor's assets has been unsuccessful or is likely to be unsuccessful.
Special features for traders from third countries (e.g. China)
Traders from the third country (e.g. China) will only receive the certificate if they appoint an authorized recipient in Germany.
The tax office may use the marketplace as a liability debtor for these traders even if enforcement proceedings against the tax debtor have not yet been initiated.
Good ideas! Are there negative effects?
The proposed law represents a turning point in time. The legislator transfers a large part of the responsibility in the area of the collection of data from Value Added Tax the marketplaces.
From next year, these companies will also have to comply with extensive documentation and monitoring obligations on a transaction basis if they do not wish to expose themselves to high liability risks.
There are still numerous open questions and technical challenges that need to be resolved in the coming months.
This is likely to lead to higher costs for marketplace operators, which could then be passed on indirectly to end consumers.
With Taxdoo simple and automated fulfill sales tax obligations
Taxdoo is the first cloud-based and fully automated VAT engine for online business and helps to meet VAT obligations in due time and form.
Taxdoo can automatically read raw data from marketplaces (e.g. Amazon or eBay) and ERP systems (e.g. plentymarkets and JTL) and
- Create accounting exports,
- report your sales abroad,
- monitor delivery thresholds on a daily basis,
- document shipments, and
- much more.
Furthermore, we have the Taxdoo-API for our customers and external developers opened. This allows transactions from all shop systems and ERPs to be imported into Taxdoo without much effort.
Simply click here or on the button below and book a live demo in which we personally explain the advantages of our automated Value Added Taxcompliance to you and/or your tax advisor via screen transmission.