Selling goods on platforms like Amazon and eBay presents significant opportunities for foreign online retailers. However, it also comes with specific VAT obligations and challenges that can lead to severe consequences if not properly managed. Here are some typical issues that foreign online sellers face when dealing with VAT in Germany.
Account Suspension Due to VAT Non-Compliance
One common problem is the suspension of seller accounts by Amazon or eBay due to non-compliance with VAT regulations. Platforms like Amazon require sellers to provide a valid VAT number and ensure compliance with local VAT laws. Failure to do so can result in account suspension, disrupting business operations and causing significant revenue loss.
For instance, if a seller does not register for VAT in Germany while storing goods in a German warehouse or exceeds the sales threshold for distance selling within the EU without proper VAT registration, Amazon can block the seller’s account. This suspension will remain until the seller rectifies the issue by providing the necessary VAT documentation and ensuring compliance with all VAT obligations.
Retrospective VAT Assessments by German Tax Authorities
Another issue is the retrospective assessment of VAT by the German tax authorities. If a foreign seller fails to register for VAT and does not charge VAT on sales to German consumers, the tax authorities can retroactively assess VAT liabilities for previous years. This can include penalties and interest, significantly increasing the financial burden on the seller.
For example, a common scenario involves sellers who exceed the €100,000 distance selling threshold into Germany without registering for VAT. The German tax authorities can demand VAT for past sales, which may lead to substantial back payments and fines. This underscores the importance of understanding and adhering to VAT thresholds and registration requirements from the outset.
Ignorance of VAT Obligations is Not an Excuse
Many foreign sellers mistakenly believe that paying VAT in one EU country or in their home country exempts them from paying VAT in Germany. However, VAT obligations are specific to each country where goods are stored or sold to consumers. Selling goods from a German warehouse to German consumers or other EU countries triggers VAT obligations in Germany, regardless of the seller’s VAT status in other jurisdictions.
Failure to comply with these obligations is considered tax evasion, with serious legal consequences. Non-compliance can lead to hefty fines, criminal charges, and significant reputational damage. Therefore, it is crucial for sellers to understand that VAT must be accounted for and paid in each country where taxable transactions occur.
Practical Steps to Ensure VAT Compliance
- VAT Registration: Sellers must register for VAT in Germany if they store goods there or exceed the distance selling threshold. The process involves applying to the German tax authorities and obtaining a VAT number.
- VAT Returns and Filings: Regular VAT returns must be filed, detailing the sales and VAT collected. This can be done monthly, quarterly, or annually, depending on the turnover.
- Use of OSS: The One-Stop-Shop (OSS) system simplifies VAT compliance for cross-border sales within the EU by allowing sellers to register and file VAT in one member state.
- Professional Assistance: Given the complexities of VAT regulations, it is advisable to seek professional assistance. VAT consultants or services provided by platforms like Amazon can help manage VAT registration, filing, and compliance effectively.
Conclusion
Navigating VAT obligations for online sales in Germany is complex but essential for legal and financial health. Sellers must stay informed about VAT regulations, ensure timely registration, and maintain compliance to avoid severe penalties.
For further assistance and queries, please contact us at WW+KN, a Baker Tilly Company, via email at info@vat-germany.com.