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Certification for Online Vendors

Conventional and stationary retailers are increasingly being displaced by online sales. The retail sector is undergoing a massive upheaval. In many cases, sales are made through electronic marketplaces such as Amazon and e-Bay (“marketplace operators”). Marketplace operators provide a virtual marketplace or platform but are generally not involved in the physical supply chain; instead, they provide a service to the participating vendors. The vendors themselves are responsible for paying value-added tax on their sales to the responsible tax office. In the past, this has resulted in significant losses of value-added tax revenue in Germany, particularly in the case of vendors residing in other countries.

The German tax authorities have responded to this situation with the “Act to Prevent VAT Losses from the Sale of Goods Online and Amending Other Tax Rules,” which was pronounced on 14 December 2018. Starting in 2019, marketplace operators will be held liable by the German tax authorities if German or foreign online vendors sell goods in Germany through their marketplace without paying German value-added tax. As a result of this legislation, marketplace operators will ultimately be compelled to work only with online vendors who can demonstrate that they are registered with the German tax authorities.

Online vendors are required to demonstrate to the marketplace operators that they are registered with the German tax authorities. This can be done by obtaining certification from the competent tax office that the online vendor is registered to pay taxes in Germany, and then presenting this certification to the marketplace operator, releasing the latter from its liability. This certification is issued by the tax office in paper form, but in the future these certifications will be available in an electronic database. An application can be filed with the tax office in writing using the “USt 1 TJ” form, or by e-mail, provided the same information is included. Online vendors living abroad are required to appoint an authorized receiving agent who is a German resident. The certification issued by the tax office is valid through 31 December 2021 at the latest, by which time e-commerce is to be standardized and reformed Europe-wide.

Bastian Mönnig, StB, MOORE STEPHENS KPWT AG

Bastian Mönnig, StB, MOORE STEPHENS KPWT AG

At the moment, marketplace operators are contacting all online vendors, residing in Germany and abroad, and asking them to present certification from the tax office and informing them that the business relationship may have to be discontinued if they fail to do so. The mere threat that marketplace operators may be held liable by the German tax authorities has had an impact: the Ministry of Finance of the State of Baden-Württemberg noted in a press release that a total of around 7,000 online vendors residing in China, Hong Kong and Taiwan were registered with the tax authorities in that State in December 2018, compared to just around 500 in May 2017.

 

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Certification for Online Vendors

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