Jerina Kelava (jerina.kelava@rtg-auren.de), tax consultant. Member of the Auren VAT Experts team

Consultancy practice shows that Germany is an attractive gateway for many third country online retailers (led by Swiss enterprises) for expanding their sales markets into other EU Member States.

For a successful expansion within the EU, a prior analysis of the business processes of the expanding enterprise needs to be performed and a sound logistics plan to be drawn up due to the existing complexity of VAT law in order to avoid any VAT risks.

Assuming that a fulfilment centre is used in Germany and that the third country online retailer will sell and distribute goods to its customers within the EU from its German fulfilment centre via its own online shop as well as via the “Amazon” electronic interface, special VAT features need to be taken into account (special features relating to import procedures in Germany  are not covered in this article and must be checked prior to a planned expansion within the EU).
A distinction must be made depending on whether a B2B or B2C transaction is involved and via which online portal the customers place their order.

1. Order placed via the retailer’s online shop

Depending on where the delivery chain ended the following VAT consequences arise:

a) for B2B constellations

Country of destination	VAT consequences	Reporting obligations
Germany	Assessable and taxable in Germany	VAT return
EU Member State (not Germany)	Assessable in Germany, but exempt from tax, if the conditions of an intra-Community supply are met	VAT return, if applicable summary report, if applicable Intrastat report

b) for B2C constellations

Country of destination	VAT consequences	Reporting obligations
Germany	Assessable and taxable in Germany	VAT return
EU Member State (not Germany)	Assessable in country of destination*	One Stop Shop (OSS) return in Germany, if applicable Intrastat report

*The shipment of goods from Germany to a EU Member State other than Germany to an individual without taking any responsibility for the transportation is regarded as intra-Community distance selling. A special feature applies to this form of selling in that the place of delivery of Germany is shifted to the respective EU country of destination when the EU-wide threshold of EUR 10,000 is exceeded (distance selling regulation). As online retailers generally exceed this sales threshold, they must comply with the distance selling regulation, which requires registration for VAT purposes in the country of destination to which the goods are shipped, as the online retailers must pay the local VAT applicable in the country of destination for the goods shipped to the customer.

The One Stop Shop (OSS) procedure is provided in order to avoid having to register numerous times for VAT purposes and having to submit numerous local VAT returns in other EU countries. The third country online retailers therefore have to register with the German Federal Tax Office (Bundeszentralamt für Steuern) in good time before carrying out any intra-Community distance selling.

2. Order placed via an electronic interface

If a customer orders goods from a third country retailer via Amazon without giving a VAT ID number and the goods are to be shipped either within Germany or abroad from Germany to another EU country, this gives rise to a significant difference compared to the statements made in bullet point 1 above:

Although the purchase is only transacted between the customer and the third country retailer under civil law, a notional chain transaction between the online retailer, Amazon and the customer is assumed for VAT purposes.

As a result of this special VAT feature the online retailer makes a delivery to Amazon and Amazon in turn makes a delivery to the customer. The payment methods are structured accordingly.

Irrespective of what triggers the shipment the delivery of the online retailer to Amazon qualifies without exception as a “dormant” supply, which is assessable where the movement of the goods begins, i.e. in Germany. As a genuine tax exemption (with the possibility of deducting input tax) applies, German VAT is not payable on this notional supply. However, this does not release the retailer from the requirement to report the sale in the German VAT return.

Conclusion

The assessability of the transactions in Germany or the use of the OSS procedure by the third country online retailers require their timely registration in Germany for VAT purposes.

As, depending on the individual case, further types of transactions other than those discussed above may arise as part of the e-commerce business (also not known), it is essential that comprehensive advice be obtained before implementing the EU expansion project in order to avoid significant VAT risks domestically or abroad.

If this article interests you, read also:
Profits arising from the sale of cryptocurrencies are subject to tax
Tax exemption for employee telephone expenses
Provision of a company car where fuel consumption is estimated

Do you need support? Find out more about our tax consulting services.

No token or token has expired.