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Germany: VAT liability of digital platforms; EC infringement proceedings initiated

Germany: VAT liability of digital platforms

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.


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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:

  • VAT liability on services rendered in the operation of ATMs (CJEU, judgment of 3 October 2019 ‒ case C-42/18 ‒ Cardpoint GmbH)
  • Assignment of the movement of goods in a chain transaction (CJEU, Opinions of the Advocate General of 3 October 2019 ‒ case C-401/18 – Herst)
  • Advance payment on a thermal power station (German Federal Tax Court, decision of 17 July 2019, V R 9/19 (V R 29/15)

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