Germany set to make Amazon, other online martketplaces, liable for unpaid VAT on domestic and cross-border sales

By Ninja-Antonia Reggelin

The German Finance Ministry on June 21 published a draft tax law introducing online marketplace operator liability for VAT.

The proposal was driven by the states (Bundesländer) in response to reported significant VAT fraud and revenue losses by fraudulent market participants. It includes significant changes to the VAT Act (Umsatzsteuergesetz UStG).

This new liability will apply regardless of the residence and establishment of the businesses and would apply to all sales subject to German VAT.

Formally, the concept will be codified by the creation of two new paragraphs, one regulating the obligations for operators of an online marketplace (para 22f UStG) and the other introducing the actual liability for trading on an online marketplace (para 25e UStG).

Section 22f UStG obliges operators of online marketplaces to record the information of suppliers. This applies to all transactions that begin or end in Germany, including purely domestic sales and cross-border sales from other EU states or third countries. It does not matter if the supplying user or entrepreneur is a resident.

The Ministry considers it to be reasonable for the operator to record the information and make it available at the request of the tax authority because the operator enables suppliers to conduct taxable transactions and because the operator should already have the necessary information based on the legal relationship with the supplying operators or can easily obtain it without much effort.

The same applies for cases in which registration on the online marketplace was not carried out as an entrepreneur but as a private individual.

The information must include:

• The full name and full address of the supplying entrepreneur.
• The tax ID number of the supplying entrepreneur and, if available, the VAT identification number.
• The start and end dates of the tax certificate of the supplying entrepreneur.
• The place of commencement of carriage or dispatch and the place of destination.
• The time and amount of sales.
• In case of non-entrepreneur suppliers, the date of birth must be provided.

Supplying entrepreneurs must apply for the mentioned tax certification at their competent tax office. It is valid for a maximum of three years and must be valid at the time of delivery so that the operator can fulfill his obligation. Entrepreneurs without any residence in Germany or an EU / EEA state must designate a recipient in Germany.

The operators’ liability encompasses the unpaid sales tax. According to the draft, the goal is to make operators of electronic marketplace accountable for VAT that is a result of transactions on platforms they initially provide. This is to ensure turnover taxation and thus considered in the interest of the general public.

The liability does not apply if the marketplace operator can prove to the tax office that he was not aware or could not have known that the supplying entrepreneur did not meet his tax obligations. In other words, operators will be able to avoid liability if they are in possession of official tax registration certificates for the businesses or if they obtain the relevant tax registration confirmations from the federal central tax office in digital form.

Comments on the draft are requested by the Finance Ministry by July 13. The cabinet could pass the draft on August 1, relaying it to the Federal Assembly and Parliament for approval. The completion of the legislative process is scheduled by the end of this year.