Online marketplaces play an important role in e-commerce. A large proportion of all e-commerce takes place via online marketplaces. Many online retailers use online marketplaces as a sales channel in e-commerce, making use of the fulfillment structures of the online marketplaces.
Joint several liability of online marketplaces
Since 2019, online marketplaces have been held liable if online retailers sell goods on their marketplace in Germany without paying VAT in this country.
According to section 25e para 1 of the German VAT Act, the online marketplace is liable for unpaid VAT on the online retailer’s supply of goods if the online marketplace facilitates this supply of goods.
See:
VAT Newsletter 08/2019: The German Ministry of Finance comments on liability of operators of electronic marketplaces
VAT Newsletter 32/2018: Electronic marketplaces shall be liable for tax shortfalls – now, it’s the online retailers’ turn
Are there any exceptions to the joint several liability of the online marketplace?
The online marketplace is not liable for the online retailer's VAT if it records a German VAT ID number for the online retailer that is valid at the time of teh supply of goods (section 25e para 2 sentence 1 of the German VAT Act). In exceptional cases, the online marketplace may record a VAT ID number from another Member State.
However, this limitation of the online marketplace's liability does not apply if the online marketplace knew or should have known that the online retailer was not fulfilling its VAT obligations or was not fulfilling them in full (section 25e para 2 sentence 2 of the German VAT Act).
Furthermore, the online marketplace is not liable if a deemed reseller model between the online retailer, the online marketplace, and the customer applies pursuant to section 3 para 3a of the German VAT Act.
See:
VAT Newsletter 15/2021: Liability of online marketplaces: Federal Ministry of Finance amends German VAT Circular
In which cases does a deemed reseller model apply?
In the following two use cases, section 3 para 3a sentences 1-2 of the German VAT Act stipulates a deemed reseller model between an online retailer, an online marketplace, and a customer:
Use case 1
Supply of goods within the EU
Online retailer is not established in the EU
Customer is a private individual
Use case 2
Import of goods from a third country
Maximum value of goods EUR 150
Customer is usually a private individual (exception: special taxable person within the meaning of section 1a para 3 no. 1 of the German VAT Act)
Example: Shipment of goods worth EUR 100 from China to a private individual in Germany
In both cases, the online marketplace is treated as if it had purchased and delivered the goods itself, in accordance with section 3 para 3a of the German VAT Act. The online marketplace thus becomes liable for the VAT. In these cases, the online marketplace is not liable for the online retailer's unpaid VAT (see above).
See:
VAT Newsletter 33/2020: Annual Tax Act 2020 (Part 2): Electronic interfaces (especially online marketplaces) are liable for VAT
VAT Newsletter 13/2021: E-Commerce: Federal Ministry of Finance comments on participation of online marketplaces in deemed chain transaction
What are the consequences for the online marketplace?
The supply of goods of the online marketplace to the customer constitutes a moved within the deemed reseller model (section 3 para 6b of the German VAT Act). This applies regardless of whether the online retailer or the online marketplace transports or ships the goods.
The distance sales rules under section 3c of the German VAT Act apply to the supply of goods from the online marketplace to the end customer. The distance sale is deemed to have taken place where the goods are located at the end of transport. If the supply of goods to the customer takes place within the EU, the online marketplace can declare this supply via the one-stop shop if it exceeds the threshold of EUR 10,000 or waives its application.
If the supply of goods to the customer is made from a third country, the online marketplace can use the import one-stop shop. The import is then VAT-exempt (section 5 para 1 no. 7 of the German VAT Act).
What are the consequences for the online retailer?
The supply of goods of the online retailer to the online marketplace constitutes the suspended supply of goods very within the deemed reseller model. If the supply of goods to the customer takes place within the EU, the supply of goods of the online retailer to the online marketplace is exempt from VAT pursuant to section 4 no. 4c of the German VAT Act. If the supply of goods to the customer takes place from a third country, the online retailer does not render any taxable supply in Germany.
What will change due to „VAT in the Digital Age“ (ViDA)?
The directive for the “VAT in the Digital Age” initiative includes an extension of the deemed reseller mode for supplies of goods via online marketplaces. According to Article 14a para 2 of the VAT Directive, the deemed reseller model will apply from January 1, 2027, to all supplies within the EU (B2C and B2B) made by online traders established in third countries via online marketplaces. The supply of goods of the online marketplace to the customer is subject to regular taxation. The supply of goods of the online retailer to the online marketplace is VAT-exempt (Article 136a of the VAT Directive).
See:
VAT Newsletter 44/2020: VAT in the Digital Age (Part 1): New deemed reseller models for digital platforms
