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Infringement Proceedings brought against Germany over e-commerce VAT Rules

This week the European Commission decided to initiate formal infringement proceedings against Germany concerning its new legislation on the liability of online marketplaces.

This is entirely based on the new regulations Germany have introduced in secs 22f and 25e of the German VAT Act, which impacts the liability of online marketplaces, the addition came into effect on 1st January 2019 and was seen as controversial. German legislators added section 22f which deals with the ‘special obligations for operators’ of online marketplaces into the German VAT Act.

According to section 25e of the German VAT Act, the operator of an online marketplace can be held liable if an online merchant supplies goods in Germany via the online marketplace and is not, or only partially, fulfilling its VAT obligations.

Operators of online marketplaces can be held liable under section 25 of the German VAT Act if an online merchant carries out taxable supplies of goods on their marketplace without paying VAT in Germany. This provision constitutes a strict liability for operators of online marketplaces.

These operators of online marketplaces can prevent liability arising if they can prove that the relevant online merchant is registered in Germany for VAT purposes. This is achieved by means of a VAT registration certificate. This certificate is issued to the online merchant, in paper form, by the German tax office, at the request of the online merchant.

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