The German Federal Council has adopted a law introducing third-party liability for online marketplaces for any unpaid VAT owed by sellers operating on their platforms, effective as of 1st January 2019.
Following in the UK’s footsteps, the motivation for the new legislation is to crack-down on e-commerce fraud by forcing marketplace operators to ensure that only traders registered for German VAT make supplies on their platforms.
Under the new provisions, the following changes to the German VAT rules will apply:
Record-keeping of all e-commerce transactions
As of 1st January 2019, electronic marketplace operators are required to keep records detailing the information listed below about transactions carried out by sellers operating on their sites:
- The supplier’s full name and address;
- The supplier’s German tax number and if available, German VAT number;
- The start and end dates of a newly launched certificate confirming the supplier’s VAT registration status;
- The supply of goods’ place of dispatch and arrival;
- The tax point and amount of turnover; and
- If the supplier is a private individual, his date of birth must be recorded in lieu of a tax/VAT number and confirmation of VAT registration certificate.
Marketplace third party liability
As of 1st March 2019, a marketplace operator will generally be held liable for the unpaid VAT on transactions made by non-EU sellers through its platform. This liability will be expanded to supplies made by EU sellers from 1st October 2019.
To an extent, the marketplace operator can protect itself from this liability by complying with the record-keeping requirements and most importantly providing the authorities with the seller’s confirmation of registration certificate.
However, if it can be shown that the marketplace operator knew or ought to have known that the seller had unfilled tax compliance obligations, possession of this certificate will not be a safeguard against the liability. Moreover, operators notified by the local tax office of traders breaching German VAT law, must act quickly and immediately remove that seller from its German platform.
If you are affected by the above legislative changes or if you have any questions, please do get in touch.