Germany passes marketplace VAT liability laws

On 9 November 2018, the German Parliament passed a new law making online marketplaces potential liable for unpaid VAT by third-party merchants on their platforms. The move follows similar legislation in the UK which came into force in March 2018. The EU is planning to replicate this in 2021.

From 2019, electronic marketplaces must hold detailed information on third-party sellers, including their German VAT transactions and a tax office certificate validating they are up-to-date on their tax affairs. The marketplace liability applies with respect to non-EU merchants from 1 March 2019, for EU-based merchants from 1 October 2019.

Germany is looking to reduce hundreds of millions in lost VAT revenues, much of which is believed to originate from sellers in other countries unaware of their German VAT obligations or deliberately evading VAT. The EU estimates that member states lose a total in €5billion in e-commerce VAT fraud.

The largest online platforms in Germany are: Amazon; Otto; Zalando; Noteboosbilliger; Bonprix; MediaMarkt; Cyberport; Conrad; Tchibo; ad Alternate.

Marketplaces must collect seller background and transaction data.

The legislation will require marketplaces to verify that merchants are German VAT registered, plus collect background information including:

• The full name and address of the seller;
• the tax number of the seller, and if appropriate the VAT ID number;
• the start and end dates for validity of the certificate for the above;
• the place where dispatch or shipping begins, and the destination; and
• the date, and quantity of sales.

Alternatively, they can seek a digital tax certificate from the tax authorities that the seller is up-to-date with their VAT compliance. If this is not satisfied, and the marketplace continues to allow the seller to market on their platform, then it would be held liable for any unpaid VAT.

Non-EU sellers will have to appoint a VAT representative / agent to obtain their tax certificate. This agent must be resident in Germany or an authorised party in another EU country.