The European Commission announced 10 October 2019 that it had decided to send a formal notice to Germany in relation to German legislation with regard to the taxation of distance sales of goods sold through digital marketplaces.
German rules for electronic marketplaces
Under German law, measures address the prevention of value added tax (VAT) losses on trade in goods on the internet and amend further the tax rules from 11 December 2018. Under the German law, effective 1 October 2019, a marketplace becomes jointly and severally liable for the VAT due on goods being sold by EU companies through its platform when transport for these goods begins or ends in Germany. This liability can be avoided only if the marketplace produces a paper certificate provided by the German tax administration to businesses selling on its electronic platform.
The EC stated that it considers this requirement to be an inefficient and disproportionate measure that hinders the free access of EU businesses to the German market, and thus is in violation of EU law. The German rules impose additional requirements on marketplace operators for them to avoid the joint and several liability—additional requirements that go beyond what is provided for by the EU rules and are at odds with the goals of the “digital single market strategy” for Europe.
Furthermore, this development comes as EU Member States have already agreed on common and efficient measures to address VAT fraud, and those EU rules are to be effective 1 January 2021. If Germany does not act within the next two months in response to the formal notice, the EC may send a reasoned opinion to the German authorities.
Proposed reporting by cross-border entities, not affecting indirect tax
The German cabinet has agreed on draft legislation to introduce a reporting requirement by cross-border tax organizations. The reporting would, for example, concern income tax and corporation tax, but would not apply with regard to VAT, harmonized consumer taxes, and customs duties that are based on the Union’s Customs Code. These indirect taxes would be excluded from the proposed reporting requirement.
According to a press release the new notification obligations would supplement the various measures of the German federal government in addressing tax fraud and tax evasion. In particular, the BMF noted that it is working to address VAT fraud in electronic marketplaces by increasing the liability of operators of such platforms at the beginning of the year and by introducing additional information requirements. However, harmonization of the proposed measures with EU law is now being questioned given the EC infringement procedure against Germany.
Read an October 2019 report [PDF 315 KB] prepared by the KPMG member firm in Germany
Other recent VAT developments that may affect businesses in Germany include the following items:
The KPMG name and logo are trademarks used under license by the independent member firms of the KPMG global organization. KPMG International Limited is a private English company limited by guarantee and does not provide services to clients. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at: + 1 202 533 4366, 1801 K Street NW, Washington, DC 20006.