Amazon Marketplace and VAT

The problem with Amazon Marketplace and ebay

Until the beginning of 2020, it was not clear who was liable for VAT when selling goods on Amazon Marketplace in Germany. To date, it had not been decided by the highest court whether Amazon itself or the Amazon Marketplace dealer was liable to pay VAT in Germany. The tax law evaluation ultimately also applies to dealers who sell goods on ebay. 

The Federal Fiscal Court decision

The Federal Fiscal Court, in a decision dated April 29, 2020, determined that dealers who sell goods to German consumers via the website of Amazon Services Europe Sàrl (Amazon) under the “sale by dealer, shipment by Amazon” model (also “fulfillment by amazon” or “pan-European shipment by Amazon”) are subject to VAT in Germany under certain conditions. The service recipient of the seller’s delivery of goods is not Amazon, but the consumer who has ordered and received the delivery.

Requirements for VAT liability in Germany

The VAT law has been standardized in Europe. According to this, a foreign company is liable for VAT in Germany if one of the following conditions is met:

• Supplying customers in Germany or other countries from a German stock
• Exceeding the supply threshold of 10.000 € (§ 3c UStG) (until 30.06.2021 100.000 €)
• Waiver of the application of the delivery threshold for Germany

Where is the VAT payable?

Many dealers who supply German customers via Amazon Marketplace often do not realize that they become liable for VAT in the course of their business activities in Germany. In the process, VAT is often paid in their own country even for goods destined for other countries.

Control by the German tax office

The German tax office collects so-called control notifications for each Marketplace dealer, which are then used to compare the sales made in Germany with the sales reported in Germany. If the parameters do not match, VAT is subsequently payable in Germany on the goods sold in Germany. This applies regardless of whether the trader has erroneously already paid tax on the goods in his own country.

The consequences for companies

For companies, this case law of the Federal Fiscal Court has the disadvantage that, if applicable, VAT must be paid twice on the goods sold. If applicable, VAT paid in one’s own country can no longer be recovered.

The consequences for managing directors

For the managing directors of the companies, there are also disadvantages that are not insignificant.

• The managing director is personally liable to the German state for the payment of VAT, regardless of whether the company managed by him is limited in liability.
• A proceeding for tax evasion will be initiated against the managing director. Depending on the amount of unpaid VAT in Germany, imprisonment is imminent.

Our recommendation

It is strongly recommended to contact a German tax advisor as well as a German lawyer in a timely manner to have one’s own business activities illuminated from the German perspective. Criminal tax proceedings can thus be avoided in advance. Only an early defense is effective. Attorney Salvatore Barba has already defended foreign Amazon Marketplace merchants in German criminal tax proceedings on several occasions. In most cases, the proceedings could be dropped with the right strategy. If you have already received a letter from the German tax office, please contact us as soon as possible here so that we can provide the best possible legal advice and defense.