On November 9, 2018, the German Bundestag (lower house of Parliament) passed the Annual Tax Act 2018 Law (Gesetz zur Vermeidung von Umsatzsteuerausfällen beim Handel mit Waren im Internet und zur Änderung weiterer steuerlicher Vorschriften), which contains the August 1st proposals to introduce VAT on foreign operators of digital platforms/marketplaces (e.g., Amazon and eBay), who do not collect and remit German VAT from the sale of goods (through the platforms) to German residents. The German Bundesrat (upper house of Parliament) will now consider the measures, which would apply from January 1, 2019, if enacted.
The VAT measures were originally announced in Germany’s Draft Annual Tax Act 2018 (Entwurf eines Jahressteuergesetzes 2018) on June 26, 2018.
VAT Registration and Collection
The November 9th legislation would add a new Section 22f to the German VAT Act, introducing VAT registration requirements for non-resident operators of digital platforms from January 1, 2019. The legislation defines an “electronic marketplace” as a website or any other tool that provides information over the internet that enables a third party to make sales to German residents. An “operator” is anyone who maintains an electronic marketplace, and allows third parties to execute sales on the marketplace.
The November 9th legislation would require non-resident operators of electronic marketplaces to collect the following information for each taxable transaction made on its platform (list is not exhaustive):
- Name and address of the supplying merchant.
- German tax number or VAT identification number.
- Country from where the goods originate.
- Time and amount of turnover.
Foreign operators of electronic marketplaces may not be liable for German VAT if they record certain information from merchants, and comply with the new VAT due diligence requirements. Upon releasing the draft legislation on August 1st, the German Ministry of Finance (Bundesfinanzministerium or BMF) said: “… companies based in third countries that are not tax registered in Germany often violate their existing tax obligations on electronic marketplaces. In particular, they do not pay sales tax on their sales generated in Germany….”
The November 9th legislation introduces a 10-year record retention requirement for foreign operators of electronic marketplaces.
Joint and Several Liability
The November 9th legislation would also add a new Section 25f to the VAT Act, which would require that a foreign operator of an electronic marketplace be liable for any unpaid German VAT by merchants using their digital platform, especially when the operator cannot provide a certificate of the merchant’s German VAT registration to the tax authorities.
Click here for more information on our BEPS research and technology solutions to address your immediate and ongoing needs.