Recently in August, Germany moved forward with a proposal directed against VAT avoidance relating to supplies of goods with a German nexus over online marketplaces.
The bills expected to pass parliament in late fall and become effective as of January 1, 2019.
Key elements entail:
- operators of online marketplaces shall be obliged to fulfil new documentation duties regarding providers of goods;
- documentation requirements shall apply to any goods that touch Germany – if the shipment starts or ends in Germany;
- online marketplaces shall become secondarily liable for VAT owed but not paid by these providers; and
- mitigating such liability will only be possible if the operator demonstrates it has complied with relevant documentation duties.
These documentation requirements are akin to new KYC thresholds being now employed by European banks since financial reforms started to take hold.
The new rules are to be applicable alike to German and non-German resident operators of online marketplaces. As per the current law bill, operators may become liable for VAT in case of non-compliance: (A) as of March 1, 2019 for supplies of goods by non-EU (and non-EEA) resident providers; and (B) as of October 1, 2019 for supplies of goods by EU (or EEA) resident providers.
Documentation shall comprise each goods provider’s:
- full name and address;
- German tax number and potentially the German VAT-ID number (as applicable);
- origin / destination of product shipment;
- date and value of the supply, and
- collect the provider’s German tax certificate or, in the absence of such a certificate, contact the federal central tax agency (Bundeszentralamt für Steuern) to confirm that the provider has been registered and cleared by the German tax authorities.
This last point is key for essentially providers of supplies with a German online nexus – worldwide – must register with the German tax authorities in order to enable the German operator of an online marketplace to comply wiht its documentation duties under the proposed law.
Online operators may be held liable by German tax authorities for any German VAT that may arise and that provider has not forwarded requisite monies to the authorities.
From the perspective of CEE companies / individuals utilizing a German based online marketplace, the implications are clear. German law shall overreach and providers may be required to meet onerous requirements by German online providers (far in excess of regulatory requirements) in order to access German consumers.
Such a long reach of German tax law may be indicative to what is to come in othe European jurisdictions, or the EU as a whole.