The topic Value Added Tax on marketplaces is complex and therefore not every online trader fulfils his tax obligations 100 percent, as we explain in this article, among others.

The tax authorities do not have the resources and technological capabilities to uncover and track each of these cases individually. For this reason, Amazon and Co. are increasingly being called to account worldwide.

What does that mean? We explain this using the example of BREXIT.

Amazon & Co. assume tax obligations of traders - using the example of the BREXIT

The UK is taking advantage of the BREXIT to free itself from the corset of EU VAT law and to make Amazon & Co. more accountable.

Thus, from 1.1.2021, in numerous cases Amazon & Co. will be obliged to pay the Value Added Tax for deliveries from marketplace traders.

You can find an overview of these cases in our BREXIT blog post.

Value Added Tax, which until now/basically the marketplace merchant owed itself, is now owed by Amazon & Co. because these technology giants are easier for the tax authorities to grab.

By law, this affects all marketplaces.

But what actually is a marketplace in the sales tax sense?

Amazon, eBay, Zalando, ... that's clear! But where exactly does the definition start and where does it end?

Is the fast-growing Shopify possibly also a marketplace, and will it have to take down Value Added Tax for Shopify merchants in the UK from 2021?

Definition marketplace using the example BREXIT: Amazon versus Shopify

HM Revenue & Customs (HMRC) clarifies.

A marketplace is an electronic interface that enables the sale of goods to consumers.

According to this definition, every website that even indirectly refers to a webshop would be a marketplace. In this respect, this general definition is not really helpful at first and Shopify would also have to deal comprehensively with the BREXIT .

HMRC therefore additionally clarifies.

A marketplace must meet all three of the following criteria in their entirety.
  • He must - somehow - be able to influence the delivery conditions.
  • He must - somehow - be involved in authorizing the payment processing.
  • He is involved in the ordering process and delivery.

Is a shop system such as Shopify therefore also a marketplace in the VAT sense and will have to pay Value Added Tax directly for certain deliveries to the UK from 1.1.2o21?

In our opinion, the answer is: No!

The first criterion already does not apply: Each Shopify merchant can determine the delivery conditions completely autonomously, without the influence of Shopify - in contrast to a Amazon merchant.

Conclusion

Marketplaces are currently and will in the future be taken more strongly into the (Value Added Tax)obligation. But who or what is a marketplace?

Put simply, it can be said that the definition is strongly aligned with the framework that Amazon sets.

At the end of the day, this is exactly what it's all about when you talk to those responsible on the side of the financial administration: Amazon (& Co.) should (should) be held more accountable.

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