Cross border selling Archives

German VAT (Value-Added Tax) plays a significant role in the financial operations of businesses and consumers within Germany.

As an accounting firm, we understand that companies trading or investing in Germany must fully comprehend and comply with this tax system to ensure financial compliance.

If your business plans to trade or is already trading in Germany, there are several important aspects you’ll need to be aware of.

German VAT

Germany introduced its VAT system in 1968, and it has continued to evolve.

Currently, the EU standard VAT rate applies at 19%, with special rates (7%) and exemptions (0%) for specific products and services.

Additionally, the German VAT system offers simplified reporting processes for smaller enterprises, making compliance more manageable.

If you plan to sell goods or services in Germany, it’s crucial to assess whether VAT registration is required.

VAT Registration in Germany

For businesses outside of Germany, VAT registration is mandatory if you intend to engage in local transactions.

Remote sellers (e.g., internet sales) must register for VAT if their annual sales exceed €100,000.

Other cases that require VAT registration include:

Importing goods into Germany
Transporting goods within Germany or across EU member states
Trading goods within Germany
Storing goods in a German warehouse

The Registration Process

To register for VAT in Germany, follow these steps:

Confirm whether your business must register for VAT. Registration must be completed before any transactions occur to avoid penalties.

Appoint a local fiscal representative (for non-European businesses) to manage tax reporting on your behalf.

Submit the required documents, including company statutes, to apply for VAT registration.

Once your documents are complete, the usual waiting time for a VAT number is about one month, though delays of 4-5 months are currently common due to system issues.

Fulfil your VAT obligations by submitting VAT returns as required.

Platforms and Sellers Affected

Currently, HMRC has access to sellers’ information on online platforms and collects their sales data.

This includes platforms such as Etsy, Vinted, eBay, as well as media platforms like Instagram and OnlyFans, which need to collect sales and income information from sellers and influencers to share with HMRC.

Additionally, platforms providing services such as Uber, Deliveroo, and Airbnb must also share data for any services receiving payments.

So far, online sellers have faced strict internal scrutiny by HMRC and entered into tax investigations.

Submitting Tax Returns

Since HMRC requested all sellers’ sales records from online e-commerce platforms, income from online sales will be fully exposed.

This means that all sales data becomes extremely transparent, and you need to understand everything about income tax reporting to avoid triggering a tax investigation.

For individual online sellers, if annual sales exceed £90,000, additional VAT registration is required.

If you are an online media person and receive “gifts” from fans or brands, it counts as income, with the same registration threshold applying.

Penalties

Firstly, once HMRC initiates a tax investigation into the store, it requests all online sales data and tax evidence. HMRC has the authority to request that the platform close the store until evidence is provided.

Secondly, during the tax investigation, online selling platforms have “joint responsibility” and are required to cooperate in providing all seller information.

When HMRC confirms tax evasion by the store, it will face a penalty of 100% of the tax owed.

Serious cases will also face prosecution and unlimited fines.