The legislature has introduced new record-keeping obligations for operators of electronic marketplaces and a new rule on the secondary liability of the operators of electronic marketplaces with effect as of 1 January 2019. This is the German legislature’s response to the massive VAT leakages and the adverse effects on competition which have arisen in the last few years due to the fact that online retailers (especially those from China) have not paid the VAT on supplies that were carried out in Germany.
Overview of the new provisions
The new provisions stipulate new record-keeping obligations for operators of electronic marketplaces in section 22f VAT Act (UStG), to which the new rule on the secondary liability is linked (section 25e VAT Act).
1. New record-keeping obligations (section 22f VAT Act)
Section 22f VAT Act imposes new record-keeping obligations on operators of electronic marketplaces. The operator must now record the following information for each supply of goods carried out on its electronic marketplace where the transport or the shipment commences in Germany:
- Complete name and address of the online retailer,
- Tax number and, if applicable, VAT registration number of the online retailer,
- Starting point and destination of the supply,
- Time of the supply,
- Purchase price, and
- Term of validity of the certification of the online retailer’s registration for tax purposes.
Every online retailer must apply to the responsible tax office for a certification of its registration for tax purposes. Private sellers do not need to do so. It is intended that in the future it will be possible for marketplace operators to retrieve this certification centrally from the Federal Central Tax Office (Bundeszentralamt für Steuern), but this is not yet possible at present. Instead, the certification will be issued to the online retailer in paper form and must be sent to the operator of the marketplace either in the original or as an electronic copy. It must be retained by the marketplace operator.
In the case of private sellers, instead of the tax number, VAT registration number and the information on certification of the registration for tax purposes, the marketplace operator must record the date of birth of the online retailer.
2. Secondary liability of the operator of the electronic marketplace (section 25e VAT Act)
The operator of the electronic marketplace is secondarily liable for the VAT of the online retailer if it cannot present certification of the online retailer’s registration for tax purposes in paper form or an electronic conformation by the tax office, or if it knew, or ought to have known by exercising the due care of a prudent businessperson, that the online retailer was not meeting its tax obligations at all, or not in full. This secondary liability includes the VAT incurred for supplies s generated on the marketplace.
The tax office responsible for the online retailer can inform the operator of the marketplace that the supplying company is failing to meet its tax obligations at all, or to a material extent. The marketplace operator must then block the online retailer’s account within the time period set by the tax office. Otherwise it will be liable for the online retailer’s VAT on further sales.
Practical consequences
The secondary liability of the operator of the electronic marketplace will apply to supplies of online retailers domiciled in non-European countries as of 1 March 2019. For online retailers domiciled in Germany, in the EU or in an EEA state, the new rules on the secondary liability will not enter into force until 1 October 2019. The new record-keeping obligations entered into force on 1 January 2019, but according to the letter of 28 January 2019 from the Federal Ministry of Finance (Bundesfinanzministerium), it will not have any detrimental consequences if the operator of the electronic marketplace does not meet these record-keeping obligations until 1 March 2019 or 1 October 2019, as the case may be.
The operators of electronic marketplaces should require all active and new online retailers which sell on the electronic marketplace to provide certification on their registration for tax purposes so that they can meet the obligations under the new provisions as of 1 March or 1 October 2019, as the case may be. The operators of the electronic marketplaces must additionally ensure that they receive all of the other information that has to be recorded, in particular with regard to the supplies. Furthermore, it must be ensured that online retailers can be excluded from the marketplace by blocking their accounts within the period set by the tax office. Apart from this, it may be necessary to amend the general terms and conditions of the electronic marketplace in order to request the information, as well as to exclude the online retailer from the marketplace.
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