The government wants to fight VAT fraud on online platforms more strongly and has adopted new regulations for 2019. The Bundestag and the Bundesrat have passed the “Law on the Avoidance of Sales Tax Defaults on Trade in Goods on the Internet and for the Amendment of Further Tax Provisions”.
The first changes will be effective as of 1 January 2019. In addition to a large number of other changes to tax regulations, this Act introduces additional obligations for online marketplace operators. These new regulations will also have significant implications for merchants selling goods through these platforms.
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Which marketplaces and product groups are affected?
As an electronic marketplace, the law defines “a website or any other tool that provides information over the Internet that enables a third party to make sales”. The operator is “who maintains an electronic marketplace and allows third parties to execute sales in that marketplace”.
This definition does not only cover the operators of large platforms such as ebay or Amazon. For example, someone who sets up a WhatsApp group that allows members to offer each other goods would be included. However, the regulations only apply to sales that are legally based on the marketplace, ie the purchase contract must be concluded directly on the platform.
Accordingly, it does not cover platforms on which sellers offer their goods, but then the seller and the buyer agree on the details outside the electronic marketplace, as is the case, for example, with some platforms for the sale of used cars.
In addition, the new regulations apply only to deliveries, ie the sale of physical goods. For electronic services such as the provision of games, streaming services and the like, it remains with the previous regulations.
New obligations for operators and dealers
Starting January 1, 2019, platform operators will need to maintain records to identify traders active on their platform and completed sales. From 1 March 2019 or 1 October 2019, platform operators will be liable to their dealers if they do not duly fulfill their VAT obligations.
In order not to incur the tax debts of their dealers, platform operators should exclude from their platforms merchants who do not provide the required information or are considered unreliable by their tax office. In return, traders should, in return, provide timely all necessary information to the online marketplaces to ensure that they are not excluded from the platforms.
Specifically, this means for online market place operators to record the following information from January onwards for all deliveries that have been officially registered on their platform and for which domestic carriage or shipment begins or ends: the name and address of the dealer, tax code, location and address Date of commencement and end of the transport or dispatch of the goods, as well as the time and amount of the turnover.
In addition, the platform operator should provide a certificate from the tax office responsible for dealers, which includes its tax registration with tax number and – if available – VAT identification number. If the dealer is not an entrepreneur, the operator must record his date of birth.
At the request of the tax office, the operator of the platform must transmit this information electronically. Traders can request the required certificates from their local tax office and pass them on to the platform operator. These are initially only valid for a maximum period of three years and must then be applied for again.
How do platform operators avoid liability risks?
If the merchants do not properly pay the VAT due on the deliveries made through the platform, the tax office may claim the platform operator for the unpaid tax. The operator can avoid this if he submits the certificate of taxation of the dealer or – for private individuals – has recorded the required information.
If the operator knows or should he know that the trader does not fulfill his tax obligations or does not fully comply with his tax obligations, he is liable despite the existence of the certificate or records.
The merchant’s tax office is authorized to inform the operator of the platform if traders do not or substantially fail to meet their tax obligations. Upon receipt of such notice, the operator will again be liable for any improperly paid taxes, regardless of whether the certificate and records are present.
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Traders outside the EU need to be fast
For dealers outside the EU and the European Economic Area, liability will apply from 1 March 2019, for other dealers from 1 October 2019. Traders outside the EU and the European Economic Area who distribute their goods through platforms and are not yet taxed Therefore, you should very soon seek to register with a German tax office so that they can apply for the required certificate.
Because it is to be feared that the registration and issuing of the certificates will take some weeks. This applies a fortiori when the tax offices are overwhelmed with appropriate applications.
Also, other traders should not wait to apply for the certificates because the operators of the platforms are unlikely to wait until the liability comes into effect before banning traders without certificates for their platforms.
Legislators expect that one million such certificates will be issued. Until further notice, this process will take place in paper and postal form, but electronic data processing is being planned by the Federal Ministry of Finance.
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About the author: Georg von Wallis is a lawyer as well as partner and head of the tax law practice group of the international law firm Greenberg Traurig.