A few days ago – on 21 June – the German Federal Ministry of Finance (BMF) published a draft of the German Annual Tax Act 2018 (JStG 2018). With this draft law, the legislator is tackling “hot topics” for the payment and FinTech industry, such as the value added tax (VAT) treatment of the distribution of (value) vouchers (I will publish a separate blog entry on this topic at a later date). This article deals with the prevention of very high VAT losses caused by traders who are based in third countries (especially in Asia) with the help of electronic marketplaces in Germany.
The situation to date
Traders who are based in third countries sell their goods from these third countries to end customers in Germany via electronic marketplaces. These goods are also delivered to the end customer. Leaving aside any peculiarities in terms of VAT when the goods are stored in customs warehouses, import VAT arises at the latest when the goods are delivered to the end customers. This import VAT is not paid by traders based abroad and the German tax authorities have no or only limited access to the traders abroad.. An example that was also picked up by the German media was the confiscation of goods in an Amazon warehouse at the beginning of 2018.
New rules in the draft German Annual Tax Act 2018 (JStG 2018)
The draft JStG 2018 stipulates, among other things, (S. 22f and S. 25e UStG-E) that the operators of electronic marketplaces are liable under certain conditions for any VAT not paid by the traders using these electronic market places. Operators of electronic marketplaces can avoid this liability if they record certain information from the traders and comply with their due diligence obligations. However, the operator is liable if the foreign trader does not provide the operator of the electronic marketplace with certain information or evidence. In addition, operators of electronic marketplaces must report data to the Federal Ministry of Finance (BMF). In future, the financial administration will also be able to request data from the operators. These new rules would apply from 2019.
Legal and practical difficulties
The intended details of the liability rules for the operators of electronic marketplaces are, at least in part, problematic from a legal perspective and also presents difficulties with regard to the practical implementation of the planned procedure. We would just like to list a few points.
Operators of electronic marketplaces are not legally obliged to monitor information from traders that suggests illegal actions (S. 7 para. 2 TMG). The enforceability of tax claims is originally the job of the tax authorities but based on the extensive liability rules, this is now transferred to private persons.
The possibility for marketplace operators to be exempted from liability will not be possible, at least for an indefinite transitional period. Traders are not given a set period of time to obtain a certificate to that effect, which exempts the operators of the marketplaces from liability. Additionally, marketplace operators are not granted a specified period of time to exclude certain traders from trading if the tax authority informs the operator that the trader does not comply with its tax obligations.
It will only be possible for operators of electronic marketplaces to check with the central tax authorities whether a certain trader complies with its tax obligations at an unspecified time in the future. Until then, the request for the certificate has to be made via a paper form. This seems practically impossible. This would mean that operators of marketplaces are in fact forced to exclude traders if they do not wish to assume liability for any VAT.
Operators of marketplaces are, in fact, obliged to check whether a trader conducts business as an entrepreneur under VAT law or not. This is simply not possible. Nevertheless, operators of marketplaces must collect personal data in order to be released, to the greatest extent possible, from potential liability for the VAT payable by the traders. Under data protection law, however, the collection and storage of data by marketplace operators would only be justified if the relevant statutory provision was legally sound according to Art. 6 para. 1 lit. b EU General Data Protection Regulation (EUGDPR).
And there is good reason to doubt this as basically, this would suggest that, similarly to data retention, personal data is collected and stored without a legitimate reason. Also similarly to data retention, there is a suspicion that this is just as disproportionate and therefore unconstitutional. Another argument for disproportionality is that the state – as in the case of data retention – imposes an obligation on private persons to collect personal data, even though the principle of official investigation applies in this area. It would therefore be worth thoroughly examining the new liability rules for VAT under data protection laws.
New rules as a result of the EU Directive on the taxation of e-commerce
The JStG 2018 stipulates at a national level how VAT losses are to be avoided in Germany in the future. Irrespective of the national rules, EU Member States have until 2021 to implement the rules adopted at the end of 2017.
Among other things, this includes an obligation of marketplace operators to pay the VAT owed by traders for sales from non-EU countries in the future. However, the VAT liability of operators of electronic marketplaces is limited to deliveries of goods up to 150 euros. If the value of the goods exceeds the 150 euro threshold, there is a customs duty to record the import VAT.
Titelbild / Cover picture: Copyright © fotolia